A clear look at 5 essential plan sponsor responsibilities to support plan oversight through market turbulence and shifting headlines.
Most401(k)fiduciarydecisionsdon’tfeel risky in the moment; they feel routine. Committeesaren’tquestioned because of onebad decision. More often,it’sbecause a consistent processwasn’tclearlydemonstrated.
That’swhyit’ssmart toregularly ask, “Can we show how that decision was made?”
Scrutiny continues to increase. Lawsuitsalleging excessive feesare becoming more frequent and costly. In 2025, the average excessive fee settlement reached $4.42million.1
Recent headlinesmay make it feel like the rules are constantly changing. You may have read that the Department of Labor(DOL) hasreturnedto the 5-part fiduciary test.The DOL aims to renew focusonalternative assetslike private equity, private credit, real estate,and “asset neutral”investment selection frameworks.
To get technical for a moment:
Thefive-part testdefineswhois considered a fiduciary whenprovidinginvestment advice.
Thefive fiduciary dutiesoutlined here definehowfiduciaries are expected to act once theygainresponsibility.
Thus, two different frameworks, and both areimportantwhen overseeing your 401(k) plan.While regulatory definitions may evolve, the expectations around fiduciary behavior haveremainedremarkably consistent over time.Let’slook at what they are and how they show up within your retirement plan.
1. Loyalty: keeping participants at the center
The duty of loyalty requires that decisions be madein the best interest of your plan’sparticipants andtheirbeneficiaries.
In practice,this shows up in questions like:
Are fees aligned with participant value?
Are investment options selected based on merit, not familiarity?
Are conflictsidentifiedand managed appropriately?
A quick pro tip: If a decision is difficult to explain to a participant,it’sprobably worthrevisitingand well documenting.
2. Prudence: supporting thoughtful decision-making
Prudence is less about being rightand more about having a sound process.
Fiduciaries are expected to approach decisions with care,usingavailable information, comparing options, and seekingexpertisewhenappropriate.
This often includes:
reviewing performance and fee data
considering alternative options
monitoring decisions over time
In fiduciary governance, the questionisn’tjust “What did you decide?”Rather,it’s“How did you get there?”
3. Diversification: providing balanced investment options
Diversification is about managing riskandnot predicting thenext bull market.
For plan sponsors, this typically means offering a range of investment options across asset classes and risk levels, allowing participants to build portfolios aligned with their needs.
A few practical checks:
cover major asset classes?
provideappropriate risklevels?
avoid unnecessary overlap?
Too few options can limit choices, but toomany create decision paralysis. The goal isbalance.
4. Following plan documents: maintaining operational alignment
The plan document outlines how the plan is designed to operate.
Fiduciaries are expected to follow these provisions consistently, including areas such as eligibility, contributions, and distributions.
In reality, thisis where small misalignments can creep in:
“We’ve always done it this way…”
“I think that’s how the plan is set up…”
“What’s our definition of compensation again…”
Those are usually signsthatit’stime for a review.
With Cycle 4 restatements on the horizon, this is a natural opportunity to revisit plan design and confirm that operations align with both the document and your broaderworkplacegoals.
5. Fee reasonableness: monitoring costs and services
Fiduciariesare responsible forreviewingplan feesanddeterminingreasonablenessin relation to the services provided.
This involves:
understanding the full scope of plan-related fees
reviewing service levels and deliverables
comparing costs to similar plans when appropriate
Fee oversight is not a one-time exercise;it’san ongoing responsibility.Regular reviewshelpconfirmthatyourplanremainscompetitive and aligned withyourparticipants’needs.
Fiduciary oversightin action
In practice, these dutiesdon’tshow up as big, dramatic decisions. They show up in small, consistent actions.
It’sthe moment someone asks, “When was the last time we benchmarked this?”
It’spausing before approving a change and saying, “Do we have documentation for this?”
It’srevisiting somethingthat’sbeen onautopilota little too long.
Individually,moments like theseseem minor. Collectively, they define fiduciary oversight.In essence, theyprovide stability,even when everything else feels uncertain.
Markets willfluctuateand headlines will change, but a disciplined fiduciary process creates consistency through it all.
Ifyou’dlike to evaluate how your current process aligns with these fiduciary duties, we are here as your support. Connect withour teamandwe canwalk through it together.
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Larmann Financial
7424 Jager Court
Cincinnati, OH 45230
Email: team@larmannfinancial.com
Phone: 513-624-2800
Website: www.larmannfinancial.com
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Larmann Financial is not affiliated with Kestra IS or Kestra AS. Form CRS Disclosure: www.kestrafinancial.com/disclosures
This information is provided as a general guide to educate plan sponsors. It is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
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