No record of any review by a 401k plan's trustees during past 5 years,

[Guest m barrett]

Co A has a 401k plan that is 5 years old. there is no record of a review by the trustees during this period. is this a problem?

additionally,rumor has it that the Co administrator's close relative worked for the investment advisor. isn't this a conflict of interests?

[Jon Chambers]

It's not necessarily a problem, but it could be. A key fiduciary responsibility is the ongoing monitoring of investment options. Given the brief facts, I'll assume there is no Investment Policy Statement (IPS) defining expectations for the funds. The good news about not having an IPS is that you haven't violated IPS review criterion. The bad news is that it would be relatively easy for a plaintiff to claim that the fund is underperforming by some measure, and that the trustees haven't provided sufficient oversight. Lack of any review over a five year period would support this claim. And perceived impropriety with a close relationship between the administrator and the investment advisor would be another bad fact, even if it isn't a prohibited transaction.

Where is the investment advisor in this scenario? Most reputable advisors will schedule periodic reviews at least annually. We're an advisory firm, and we review most qualified plan funds quarterly, in a formal written report.

Have the trustees violated any defined regulations? Probably not. Have they behaved imprudently, and exposed themselves to potential litigation? Probably so. What would happen if they were sued? Ask an attorney, I don't know.

Hope this helps,

Jon