What Investments are right for my Plan?
Where should we put our retirement money?
When establishing a 401(k) Profit Sharing Plan, a business owner generally needs help with 3 things:
- Investment selection and monitoring
- Record Keeping
Administration and record keeping may be handled by the same entity (a bundled provider) or separated (un-bundled, using an outside TPA). No one solution is perfect for every situation and we can help you decide which is best for you.
Investment selection and monitoring almost always involves selecting a lineup of mutual funds for you and your employees to choose from. However many employers are exploring other options, which may include:
- The ability to purchase individual stocks
- The ability to purchase crypto currencies such as Bitcoin or Ethereum
- Real estate
- Life insurance (typically in defined benefit plans)
Our job is to help you figure out what works best for you, help you limit your liability exposure and find the most efficient and cost effective setup that serves you and your employees best interest.
So can I buy Bitcoin or other Crypto Currency in my 401(k) plan or not?
The short answer is “maybe”. Technically there’s no law against crypto currency within a 401(k) plan. However as of right now there are virtually no 401(k) providers that have trading platforms that allow for it. Crypto markets tend to work on a 24/7 market cycle, are highly volatile and still relatively new to the 401(k) market. That said, there are innovations happening and more mainstream acceptance of crypto as a viable asset class, so we expect new products to become available as this market matures. Give us a call and we will do our best to help you find a solution that works for you. Please also see the following articles for some more context on digital assets and how they are becoming more mainstream:
What about Socially Responsible Investing (SRI) or Environmental, Social, Corporate Governance Investing (ESG)?
ESG or SRI investing has gained in popularity, but has not found as much traction in the 401(k) market. It is perfectly acceptable to allow for these types of investments within a corporate retirement plan, however a plan sponsor must have processes and procedures in place to ensure that these investments are suitable for the participants in the plan. The argument, put simply, is that an ESG fund may sound good on paper, but is it in the best interest of the participants in the plan if that ESG fund under-performs it’s non-ESG peers or the indexes? The risk an employer may face with this type of investment is a participant in the plan may think that this is the obvious, safe and socially responsible choice…but if that fund has poor returns in relation to the rest of the market or other investments they may be subject to fiduciary liability.
At MRC we can help you ensure the funds offered in your plan are appropriate and help you ensure your process of selecting and monitoring those investments will hold up to scrutiny by helping you create a custom investment policy and by helping you maintain your fiduciary processes and files.
Following are some articles that may interest you on ESG and SRI investing in 401(k) Plans: