As business owners, CFOs, and HR executives finalize corporate budgets and operational objectives for the upcoming fiscal year, retirement plan committees must also address an essential responsibility: fiduciary governance of the plan.
Under the Employee Retirement Income Security Act of 1974 (ERISA), plan sponsors and committee members are held to a strict legal standard of care. Fiduciaries must act solely in the interest of plan participants and beneficiaries, ensuring plan administrative costs are reasonable, investment options are prudently selected and monitored, and service providers perform according to agreed terms.
Conducting a structured fiduciary review in November provides committees with a clear, objective assessment of their plan’s health, ensuring that corporate retirement programs enter the new year better positioned.
The Cost of "Autopilot" Governance
Corporate retirement plans frequently fall into an operational rut. A company selects a recordkeeper, establishes an initial fund menu, and delegates administrative tasks to internal staff. Over time, as corporate headcount grows and total plan assets appreciate from $5 million to $20 million, $50 million, or more, the original plan structure remains unchanged.
This "autopilot" approach creates two distinct risks for plan sponsors:
Unnecessary Fee Drag for Employees: Recordkeeping pricing is largely based on economies of scale. If vendor fee schedules are not periodically benchmarked against current market rates, participants end up paying retail-tier administrative expenses on institutional-sized asset pools.
Personal Fiduciary Exposure for Committee Members: ERISA holds plan committee members personally liable for losses resulting from a breach of fiduciary duty—including failure to monitor investment options or failing to control plan expenses.
To maintain compliance and drive better participant outcomes, plan committees should execute a four-part year-end fiduciary audit.
The Year-End Fiduciary Checklist
1. Benchmark Total Plan Fees Against Peer Group Standards
Fiduciaries are not required to select the lowest-cost provider by default, but they are legally obligated to ensure that total plan compensation is reasonable relative to the services delivered.
Review all direct and indirect fees associated with your plan:
Recordkeeping and Administration Fees: Determine whether pricing is assessed as a flat per-participant fee or an asset-based percentage fee. For growing plans, flat per-participant pricing structures often yield substantial cost savings as asset size scales.
Investment Management Expenses: Calculate the weighted average expense ratio across the active investment menu. Verify whether participants are enrolled in the lowest available share class (e.g., institutional vs. retail share classes).
Indirect Revenue Sharing: Audit whether recordkeepers receive revenue-sharing payments or 12b-1 fees from underlying fund managers, and verify whether those funds are credited back to participant accounts or used appropriately to offset plan administrative expenses.
Comparing these figures against independent market benchmarks on an annual cycle provides clear, quantitative proof of fee oversight.
2. Audit the Investment Lineup Against the IPS
An Investment Policy Statement (IPS) is the foundational governing document that defines how a 401(k) plan selects, monitors, and replaces investment options.
During your year-end audit, evaluate every fund on your active menu against the specific performance, risk, and expense criteria set forth in your IPS:
Review 1-year, 3-year, and 5-year risk-adjusted returns relative to appropriate benchmark indices.
Check for manager changes, strategy shifts, or style drift within underlying mutual funds.
Formally place underperforming funds on a documented "watch list" according to IPS guidelines, or initiate a fund replacement process if a fund consistently fails to meet policy standards.
3. Evaluate Qualified Default Investment Alternatives (QDIA)
Because automatic enrollment features are widely implemented across modern corporate plans, the vast majority of new participant deferrals flow directly into the plan's Qualified Default Investment Alternative (QDIA)—typically a target-date fund (TDF) suite, a balanced fund, or a managed account service.
Committees should audit their QDIA setup annually:
Evaluate whether the QDIA glidepath (the rate at which asset allocation becomes more conservative over time) aligns with your workforce demographics, average retirement age, and employee turnover rates.
Compare "to-retirement" vs. "through-retirement" glidepath philosophies.
Assess the fee structure of underlying target-date funds, reviewing whether passive (index-based) TDF suites offer a more cost-effective default solution for your participants.
4. Document Minutes and Update the Fiduciary Governance File
In the event of a Department of Labor (DOL) audit or fiduciary challenge, a plan sponsor's primary defense is proof of process. Under ERISA, demonstrating that the committee followed a prudent, documented decision-making process is just as important as the financial outcomes achieved.
Ensure that every year-end review, vendor fee analysis, IPS evaluation, and fund modification is fully detailed in written committee meeting minutes. Formalize these records alongside vendor contracts, Form 5500 filings, and fee disclosures within a centralized, secure fiduciary governance binder.
Strengthening Corporate Retirement Governance
Retirement plan governance should never be treated as an after-the-fact administrative burden or a passive compliance checklist. When leadership establishes a disciplined, repeatable audit process, the benefits extend across the entire organization: committee members mitigate their personal fiduciary risk, the enterprise builds a defensible compliance record under ERISA, and employees keep more of their hard-earned compounding returns. As you finalize corporate plans for the coming year, taking time to benchmark fees, refine investment options, and formalize committee records can transform your 401(k) program from a standard benefit into a powerful tool for employee retirement readiness and workforce retention.
If you are ready to evaluate your corporate 401(k) plan, benchmark administrative fees, and streamline your committee's fiduciary oversight, we are here to support your team. Read more about our corporate retirement plan consulting or reach out to schedule a complimentary 401(k) plan review today.
Frequently Asked Questions
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Under ERISA, 401(k) plan fiduciaries are legally required to act solely in the interest of plan participants and beneficiaries. Key responsibilities include ensuring administrative fees are reasonable, diversifying investment options, selecting low-cost share classes, and following a documented decision-making process.
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Plan committees should benchmark recordkeeping and administrative fees at least every 1 to 3 years, or whenever plan assets grow significantly. Regular benchmarking ensures the company captures institutional pricing tiers as total plan asset volume increases.
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ERISA fiduciary services, including ERISA Section 3(21) investment advisory and Section 3(38) investment management services, are provided by Savvy Advisors, Inc., not by The Retirement Studio (which is a marketing name only). Appointment of a 3(38) investment manager transfers discretionary investment management responsibility for the plan’s investment options to Savvy Advisors, Inc., but does not relieve the plan sponsor or other plan fiduciaries of their duty to prudently select and monitor the investment manager, or of other fiduciary obligations under ERISA. Plan fiduciaries should consult with their own ERISA counsel regarding the scope and limitations of any fiduciary delegation.
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An IPS outlines the objective standards used to select, evaluate, and replace investment options on the plan menu. Adhering to a written IPS provides plan sponsors with a documented, defensible decision-making framework that helps ensure the plan is better positioned against DOL compliance audits and participant claims.
All advisory services are offered through Savvy Advisors, Inc. (“Savvy Advisors”), an investment advisor registered with the Securities and Exchange Commission (“SEC”). Savvy Wealth Inc. (“Savvy Wealth”) is a technology company and the parent company of Savvy Advisors. Savvy Wealth and Savvy Advisors are often collectively referred to as “Savvy”. The Retirement Studio is used for marketing purposes only. The Retirement Studio is not a separately registered investment advisor. This content is provided for informational purposes only and should not be considered investment advice or a recommendation. Individual results will vary. Registration with the SEC does not imply a certain level of skill or training.
Investing involves risk, including possible loss of principal. Diversification and asset allocation do not ensure a profit or protect against loss. Tax-advantaged strategies are subject to eligibility requirements and holding-period and other rules, and may not achieve the intended results. Tax laws, contribution limits and thresholds change; figures are as of November 2026. Past results are not indicative of future results.
This material is provided for general educational purposes only. It is not individualized investment, tax or legal advice, and is not an offer or solicitation to buy or sell any security. Savvy Advisors does not provide tax or legal advice; consult your own tax professional or attorney. [If applicable: Certain Savvy personnel are licensed insurance agents and may receive commissions on insurance products, which creates a conflict of interest.]
