"Markets change and so will we." TM

A group of former Dell employees filed a proposed class action alleging that Dell’s 401(k) offered poorly performing investments, including actively managed target-date funds that underperformed readily available alternatives. According to the complaint, the company relied on custom benchmarks that failed to capture the lagging returns, resulting in alleged losses of more than $318 million for plan participants.

This situation underscores why thoughtful plan design, prudent investment selection, and robust fiduciary oversight are critical for any corporate retirement plan.

• Investment selection matters: Target-date and other plan funds should be carefully reviewed against broad, transparent benchmarks to help ensure they are competitive and appropriate for participants.
   

• Fiduciary standards are strictly enforced: Plan sponsors can be held accountable if investment options underperform relative to available alternatives without appropriate due diligence.
   

• Participant flexibility reduces risk: Offering a broader range of investment choices, such as self-directed brokerage options, can help meet diverse employee needs and reduce susceptibility to concentrated underperformance.
   

• Professional oversight adds protection: Engaging an independent fiduciary (e.g., a 3(38) investment manager) to manage selections and sign plan filings (such as the DOL Form 5500) can help strengthen a plan’s governance and compliance.
  
   

If you’d like to discuss how these trends might impact your company’s retirement plan design or fiduciary responsibilities, we’d be happy to talk through options that align with your goals while helping manage risk.