Diversification in Retirement Plans
WHY RETIREMENT PLANS SHOULD OFFER LOW COST DIVERSIFIED MUTUAL FUNDS
Whether you are an employer sponsoring a retirement plan, a participant investing in a retirement plan or an individual investor, passively managed mutual funds can offer potential advantages to actively managed mutual funds. The lower cost and broad diversification of passively managed mutual funds make them a compelling investment strategy.
Employers and plan sponsors hold a fiduciary responsibility for the investments offered through their retirement plans and are legally required under ERISA to make decisions that are in the best interest of plan participants. Most lawsuits alleging a breach of fiduciary investment duty focus on underperformance of the available investment options and excessive plan expenses. Recent court decisions suggest that including a broad set of diversified, low cost and passively managed mutual funds might reduce litigation exposure for plan fiduciaries. Also, fee disclosure regulations becoming effective January 1, 2012 are driving plan sponsors to seek less expensive investment alternatives.
The article linked below focuses on the potential advantages index funds offer employers sponsoring retirement plans and employees participating in the plans.
If you need assistance evaluating the investment options available in your retirement plan, or in navigating other areas of the retirement plan landscape, please contact our Plancorp Retirement Plan Advisors team.