The Profit-Sharing Council of America reported that more than 20% of plans offer a brokerage window and that percentage is growing. It is true that a brokerage window provides a much wider range of investment options and potentially lower cost alternatives. It is also clear that the brokerage window would appeal mostly to those participants that are more hands on, i.e. higher paid and more knowledgeable about managing their investments. Unfortunately, this option, if offered, must be offered to all participants. Although the option must be offered to all participants the availability of the brokerage window can be limited to a specified percentage of the participant’s account, it can exclude certain investments, e.g. limited partnerships, options, futures, and other derivatives.

n most cases errors in the administration of a retirement plan result from the ERISA administrator’s lack of understanding of the provisions in the plan document. A clear example would be the definition of compensation. Does it exclude some part of compensation, e.g. bonuses, is it based on the plan year or calendar year? Understanding eligibility requirements as they relate to entry dates in another potential for an operational error when an employee enters the plan too early or too late. To avoid errors of this type, the plan should have a written administrative policy that identifies who is responsible for the various functions required to manage the plan. Will the plan sponsor or the payroll vendor be responsible for monitoring timely deposits of employee deferrals? Does the plan document indicate when and how often an employee can make changes to their deferral election?

At current count there are over 100 cases in the courts based on fiduciary breach including excessive fees, inappropriate investment choices, self-dealing including exclusive use of proprietary funds. The majority of these cases are class actions in which an employee is named as the representative of the employee class. Some of these cases were dismissed for lack of proper supporting documentation for plaintiff claims and some were dismissed based on proper use of “process” as discussed in a prior topic even though the result was less than optimal.

The Profit-Sharing Council of America reported that more than 20% of plans offer a brokerage window and that percentage is growing. It is true that a brokerage window provides a much wider range of investment options and potentially lower cost alternatives. It is also clear that the brokerage window would appeal mostly to those participants that are more hands on, i.e. higher paid and more knowledgeable about managing their investments. Unfortunately, this option, if offered, must be offered to all participants. Although the option must be offered to all participants the availability of the brokerage window can be limited to a specified percentage of the participant’s account, it can exclude certain investments, e.g. limited partnerships, options, futures, and other derivatives.