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RETIREMENT PLAN INVESTOR

Use your plan ID (available on your account statement) to determine which employer-sponsored retirement plan website to use:

IF YOUR PLAN ID BEGINS WITH IRK, BRK, 1, 2 OR 754

Visit americanfunds.com/retire

IF YOUR PLAN ID BEGINS WITH 34 OR 135

Visit myretirement.americanfunds.com

Categories
Active Management
Third-party white paper: Active management plays an important role in 401(k) plans

The fiduciary duty that applies to qualified retirement plan investment selection and ongoing oversight is one of the most challenging — and misunderstood — responsibilities for plan sponsors.


A new white paper by Groom Law Group (commissioned by Capital Group and available below) may provide some guidance on how to act in the best interest of the plan’s participants, given the backdrop of recent regulatory guidance and court decisions.


Specifically, the paper concludes there is more flexibility for fiduciaries among investment options than some high-visibility lawsuits suggest, provided that the fiduciaries act prudently in selecting and monitoring investment funds. When ERISA principles, U.S. Department of Labor authorities and court decisions are considered, the paper concludes, active as well as passive strategies can serve an important role in a 401(k) plan.


Highlights include:


The active vs. passive debate

  • ERISA makes no distinction between active and passive investments when it comes to the selection and monitoring process.
  • Neither the DOL nor the courts have stated that active strategies are inappropriate for 401(k) plans.

Investment selection

  • Neither ERISA nor the DOL mandate any type of investment as necessarily prudent or imprudent.

Investment results

  • Whether plan fiduciaries acted prudently in making an investment decision cannot be measured in hindsight based on how the investment performed.

Plan fees

  • The relevant facts and circumstances concerning investment-related fees include the expected return that could be achieved for the fees paid.

Recent court decisions

  • Several courts have rejected plaintiffs’ attempt to compare active to passive strategies, ruling that active offers different objectives, risks and potential results than passive.


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Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.

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American Funds Distributors, Inc., member FINRA.

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.