Small Plan Sponsors: Your life just got easier.

The DOL May Be Making Your Life a Bit Easier.

At a recent National Association of Plan Advisors conference attended by RSA, Dan Aronowitz, EBSA Assistant Secretary, outlined a proposed rule on investment selection that boils down to one key idea: You’re judged on your process, not your results.

What this means

When companies offer a retirement plan like a 401(k), they’re responsible for helping choose and monitor the investment options in the plan. That responsibility comes with legal risk. A lot of small companies worry because:

• They don’t have large HR or legal departments 

• They rely heavily on advisors

• They’re afraid they could get sued if an investment performs poorly 

So instead of asking:
“Did this investment end up being perfect?”

The focus becomes:
“Did you do your homework before choosing it?” 

That includes:

• Comparing investment choices 

• Reviewing fees 

• Checking performance regularly 

• Documenting why decisions were made 

The big picture

A retirement plan sponsor is not expected to predict the future perfectly. They’re expected to act carefully, thoughtfully, and consistently.

Why this matters

Some lawsuits happen years later after investments underperform. People look back and say:
“You should never have picked that fund.”

The proposed rule could help protect plan sponsors from that kind of hindsight criticism if they can show they followed a solid process at the time.

Bottom line

If you have a solid process and can show it, you’re in a much stronger position. That’s a shift many small plans have been waiting for.