Will a prototype document allow a user to specify an investment alternative by its name?

[Peter Gulia]

A small business is ready to begin a new 401(k) retirement plan. The business is the manager of an SEC-registered publicly available mutual fund. The business wants to include this fund as a plan investment alternative. (In addition to the specified fund, the plan fiduciary will select prudently at least one fund in every recognized general investment category, other than the category of the settlor-named fund.) Instead of a typical discretion that allows a plan fiduciary to select the investment menu, the business will create the retirement plan only if the plan specifies the "inhouse" fund as a settlor act.

1) Does any documents provider offer a prototype or volume-submitter plan that allows a user to specify a plan investment alternative by name?

2) Would such a plan have language (whether in the base plan or an adoption agreement) that precludes every fiduciary from removing the settlor-named investment alternative?

3) Would such a plan have language that precludes the plan sponsor from amending the plan to remove the creation-named investment alternative?

Or would a lawyer be right to tell this business that implementing its purpose means paying for a custom plan document?

[four01kman]

Or would a lawyer be right to tell this business that implementing its purpose means paying for a custom plan document?

This seems to be the right answer for me.

[rcline46]

A fiduciary (trustee) has the obligation to review and remove 'poor' performing funds from the list of choices. This would be a 'prudent man' action. Not permitting a prudent action by language of the document would seem to be a reason for not allowing the document to be qualified.

Custom document, submitted, with the language specifically noted, and I dont think you will get approval.

[Kevin C]

Even if you did get a determination letter, a fiduciary would still have to monitor and remove the in-house fund if it ceased to be an appropriate investment for the plan. The requirement to follow the terms of the plan document only applies to the extent the provisions are consistent with ERISA [Act. Sec. 404(a)(1)(D)]

[Kevin C]

There was an article on this topic posted in the news section today.

Mandating company stock investments does not shield fiduciaries, DOL says

http://us.select.mercer.com/blurb/170617/

The article includes a link to the DOL amicus brief.

[Peter Gulia]

Kevin C, thanks for adding the link. To resume your 404(a)(1)(D) discussion:

Do you think that the scope of review that a fiduciary must use differs based on whether its decision is:

an open discretionary decision on whether to include a mutual fund in a menu of investment alternatives for participant-directed investment, or

a decision on whether to remove a fund because the fund is so bad that failing to remove the fund disobeys ERISA?

If the plan's menu includes other funds (both index and non-index) for the same investment class as the settlor-specified fund that might be removed, how does leaving the settlor-specified fund on the menu harm the plan in a way that wouldn't be the result of a participant's direction?