10 Things To Know About A 401k Financial Advisor In 2025

Plan sponsors and business owners in 2025 face a 401(k) ecosystem that demands clarity, discipline, and the right partner. Higher IRS contribution thresholds, evolving ERISA mandates like PTE 2020-02, and next-generation technology have raised the bar for plan oversight.

Engaging a qualified 401(k) financial advisor means transferring fiduciary duties, refining plan design, ensuring ERISA compliance, and uncovering cost efficiencies—all underpinned by a best-interest approach. In this guide, you’ll explore ten critical insights for selecting and collaborating with an advisor: from distinguishing true fiduciaries and decoding fee structures to applying the latest catch-up provisions, leveraging 3(16) and 3(38) services, and harnessing automation. Whether you’re launching a new plan or optimizing an existing one, these points will help you lower liability, enhance participant outcomes, and maintain compliance. Let’s begin.

1. Understanding the Role of a 401(k) Financial Advisor in 2025

The modern 401(k) advisor does more than pick funds. In 2025, plan sponsors look to these professionals for guidance on plan design, ERISA compliance, cost management and participant engagement. A qualified advisor can help you craft a flexible structure that aligns with your workforce needs, meets Department of Labor standards and limits fiduciary risk.

A 401(k) financial advisor typically offers:

Plan design advice: matching formulas, vesting schedules, eligibility rules.
Investment lineup selection: balancing performance, diversification and fees.
Participant education: enrollment meetings, online tools and ongoing communications.
Rollover assistance: guiding terminated employees through distribution or rollover options.

If you need a refresher on plan basics, check our guide to 401(k) fundamentals.

Imagine a mid-sized manufacturing firm juggling a uniform 50% match up to 6% of pay. After engaging an independent fiduciary advisor, they introduced a tiered match—100% on the first 3% and 50% on the next 2%—and replaced underperforming funds. Within six months, employee participation rose, plan costs stabilized and administrative headaches eased. That kind of transformation underscores the value of bringing a specialist on board.

1.1 Scope of Advisory Services

A full-service 401(k) advisor handles multiple facets of plan management:

Fiduciary oversight: operating under ERISA’s best-interest standard.
Investment selection: ongoing evaluation of fund performance, fees and manager changes.
Asset allocation recommendations: offering model portfolios or tailored guidance.
Compliance monitoring: managing nondiscrimination testing, contribution limits and required disclosures.

1.2 Differences Between Advisors, Brokers, and Fiduciaries

Not all advisors play by the same rulebook. Broker-dealers often recommend products that meet a “suitability” test rather than a best-interest obligation. Wealth managers may focus on holistic financial plans for high-net-worth clients, leaving retirement plans on the periphery. True fiduciary advisors sign a best-interest contract and adhere to PTE 2020-02’s impartial conduct standards—minimizing conflicts and ensuring their advice is aligned with your plan’s outcomes.

1.3 Situations When an Advisor Is Most Valuable

Advisors deliver the greatest impact when you face significant change:

Launching a new plan: designing competitive match structures and automated enrollment.
Mergers & acquisitions: consolidating multiple plans and harmonizing benefit provisions.
Responding to a DOL audit: gathering documentation, updating policies and managing filings.
Scaling an existing plan: reevaluating fund lineups, controlling costs and boosting participation.

2. Fiduciary Standards and the Best Interest Contract Exemption (PTE 2020-02)

ERISA’s fiduciary rules require advisors to put participants’ interests above their own. In 2020, the Department of Labor finalized PTE 2020-02—commonly called the Best Interest Contract Exemption—to ensure advisers can be compensated without conflicting incentives. For plan sponsors, insisting on PTE 2020-02 compliance means your advisor takes on a true fiduciary role, guarding against hidden kickbacks and misaligned recommendations.

2.1 Overview of PTE 2020-02 and Its Purpose

PTE 2020-02 permits advisors to receive commissions, revenue sharing or other forms of payment only if they commit in writing to act in the plan’s best interest. The exemption covers a broad range of advice—everything from investment selection to distribution guidance—so long as the advisor provides a contract specifying:

Their fiduciary status under ERISA.
A pledge to adhere to impartial conduct standards.
A plan for annual reviews to confirm compliance.

Learn more from the DOL’s FAQ on the Best Interest Contract Exemption.

2.2 Impartial Conduct Standards

Under PTE 2020-02, advisers must satisfy three key standards:

Best Interest: Advice must align with the financial interests of the plan and its participants—no steering into proprietary or high-fee products.
Reasonable Compensation: Fees and commissions must be fair relative to the services provided, ensuring no excessive or hidden charges.
No Misleading Statements: All communications, marketing materials and disclosures must be accurate, complete and free of deceptive claims.

These safeguards help plan sponsors feel confident that recommendations are driven by plan performance and participant outcomes, not by kickbacks or revenue sharing.

2.3 Written Disclosures and Annual Reviews

Compliance with PTE 2020-02 hinges on robust documentation. Advisors must deliver written disclosures that cover:

Their fiduciary status and the scope of advice.
Potential conflicts of interest, including fee arrangements.
Rationale for any rollover or distribution recommendations.

Additionally, they must conduct an annual retrospective review, certifying that the advice met impartial conduct standards and that fees remained reasonable. This report should be provided to the plan sponsor, offering tangible proof of the advisor’s commitment to best-interest practices.

By requiring PTE 2020-02 compliance in your advisory agreement, you create a transparent, accountable partnership—one that aligns compensation with outcomes and minimizes the risk of ERISA violations.

3. Fee Structures: How Advisors Are Compensated and What You Pay

Advisors don’t work for free—and the way they get paid can have a big impact on your plan’s bottom line and your participants’ nest eggs. Understanding fee structures helps you compare proposals, spot hidden charges, and ensure that the advice you’re paying for truly adds value.

Rather than accepting a single number, use a few targeted questions to unpack the full cost. Ahead of any interview, consider asking:

What is your primary fee model, and how is it calculated?
Are there any additional or ancillary fees—such as revenue sharing or administrative charges—beyond your stated rate?
How do you disclose and reconcile any third-party payments you receive?
Can you provide sample fee disclosures (Schedule C or 408(b)(2)) for a plan of our size?
How often will we receive a comprehensive, itemized fee report?

Armed with answers to these questions, you’ll be able to compare “apples to apples” and avoid unexpected surprises down the road.

3.1 Common Compensation Models

Advisors typically fall into one of three camps:

Flat Retainer: A fixed annual or monthly fee.
Pros: Predictable budgeting and no incentive to grow plan assets just to boost fees.
Cons: May feel high if plan assets shrink or services are underutilized.
Percentage of Assets Under Management (AUM): A sliding scale—commonly 0.25% to 1% of plan assets.
Pros: Fees move in step with plan growth, aligning advisor and sponsor interests.
Cons: Smaller plans pay proportionally more; potential conflict if rapid asset growth drives higher fees without added services.
Commissions and Revenue Sharing: Payments tied to investment product usage—12b-1 fees, share class differentials or fund-level revenue sharing.
Pros: Can offset advisor fees for sponsors with no direct out-of-pocket cost.
Cons: Greater risk of conflicts; sponsors bear responsibility for uncovering and disclosing these indirect costs under ERISA.

Each model has its trade-offs. Flat fees favor predictability, AUM fees align growth incentives, and commissions may seem “free” but often require careful scrutiny of underlying fund economics.

3.2 Understanding Hidden Costs and Fee Disclosures

Beyond your advisor’s headline rate, plans often incur a host of embedded expenses:

Revenue Sharing: Fund complexes pay recordkeepers and advisors a slice of plan assets. These payments can lower visible fees but inflate the overall cost.
12b-1 Fees: Ongoing distribution and marketing fees charged by some mutual funds.
Administrative Mark-Ups/Downs: Recordkeepers or custodians may tack on transaction fees or adjust share classes for compensation.

Under ERISA, sponsors must collect and distribute participant-level fee disclosures and file Schedule C (for Form 5500) detailing all service provider compensation. When reviewing disclosure statements:

Compare total “all-in” expenses versus the advisor’s standalone fee.
Look for part-to-part reconciliations—if revenue sharing covers your advisor, is the match level or fund lineup affected?
Confirm that any fee offsets or credits are reflected in periodic statements.

3.3 Impact on Plan Costs and Participant Returns

Even modest fee differentials can compound over time. Consider two scenarios on a $10,000 investment with a 6% gross return over 20 years:

At 0.25% total annual fee:
  Effective return = 5.75%
  Ending value ≈ $30,500

At 0.50% total annual fee:
  Effective return = 5.50%
  Ending value ≈ $29,450

A mere 0.25% difference in fees costs participants over $1,000 on that $10,000 balance—and scales up significantly across a multi-million-dollar plan. By dissecting advisor compensation and uncovering hidden costs, you safeguard participant outcomes and demonstrate fiduciary prudence.

4. 2025 Contribution Limits and Cost-of-Living Adjustments You Must Know

Each year, the IRS adjusts retirement plan limits to keep pace with inflation. For 2025, plan sponsors and participants will see notable increases across elective deferrals, catch-up contributions and compensation thresholds. Staying on top of these changes ensures your plan remains compliant, your funding strategies stay competitive and your communications to employees are accurate.

Key 2025 limits include:

Elective deferral limit: $23,500
Catch-up contribution (age 50+): $7,500
SECURE 2.0 enhanced catch-up (ages 60–63): $11,250
Compensation cap for contribution calculations: $345,000

These figures come from IRS Notice 2024-72, which outlines the cost-of-living adjustments for retirement plans. Keeping plan documents and participant notices up to date with these limits is crucial to avoid testing failures and ensure employees maximize their savings opportunities.

4.1 Elective Deferral and Catch-Up Limits for 2025

The base elective deferral limit—that is, the maximum an employee can defer from their paycheck into a 401(k) plan—rises to $23,500 in 2025, up from $22,500 in 2024. For participants aged 50 and older, the standard catch-up contribution remains at $7,500.

These increases mean a 50-year-old employee could sock away up to $31,000 ($23,500 + $7,500) in pretax or Roth contributions next year. Failing to adjust payroll systems or participant elections in time can lead to inadvertent over-deferrals and testing headaches, so coordinate with your recordkeeper well before year-end.

4.2 New SECURE 2.0 Catch-Up Provision for Ages 60–63

The SECURE 2.0 Act introduced an extra boost for employees aged 60–63: a catch-up limit equal to 150% of the regular catch-up amount. In 2025, that translates to $11,250 in additional contributions—but only if the plan permits catch-ups on a Roth (after-tax) basis.

This provision rewards near-retirement workers with more flexibility to accelerate savings. Plan documents must explicitly authorize Roth catch-up contributions, so sponsors should review their provisions and update SPD language accordingly. Clear communication is vital to ensure eligible participants understand this one-time window.

4.3 How These Changes Affect Plan Design and Participant Contributions

Raising contribution caps can have ripple effects on employer match formulas and testing results. For example, a fixed-percentage match on deferrals may cost more when participants defer larger percentages of pay. Sponsors might consider:

Adjusting match tiers (e.g., 100% on the first 3%, 50% on the next 2%)
Implementing or revising safe-harbor options to streamline nondiscrimination testing
Updating enrollment materials and internal portals with new limits

Communicating changes early—through emails, intranet announcements and on-site meetings—helps employees recalibrate their deferral elections. Providing bite-sized explainer materials or interactive calculators can also demystify the impact of higher limits and encourage maximum participation.

5. Comparing Advisor Services: 3(16) Administrator vs 3(38) Investment Manager vs 402(a) Named Fiduciary

Understanding the distinctions between 3(16) administration, 3(38) investment management and a 402(a) named fiduciary empowers plan sponsors to offload complex duties and fortify ERISA compliance. By delegating administrative, investment and strategic responsibilities to dedicated experts, you can streamline operations, reduce liability and focus on your core business.

5.1 Role and Responsibilities of a 3(16) Administrator

A 3(16) administrator handles the everyday mechanics of running a 401(k) plan under ERISA’s guidance. Core tasks include:

Processing enrollments, loans, hardship withdrawals and distributions
Preparing and filing Form 5500, census data and other government-required reports
Managing eligibility, vesting schedules and compliance testing (ADP/ACP, top-heavy)
Distributing participant notices (SPD, SMM, safe-harbor, blackout)

Delegating these duties to a 3(16) administrator shifts detailed recordkeeping and filing deadlines to specialists, lightening the load on your HR and finance teams and minimizing the risk of administrative mishaps.

5.2 Role and Responsibilities of a 3(38) Investment Manager

Under ERISA section 3(38), an investment manager assumes full discretion over the plan’s investment lineup. Key responsibilities are:

Conducting due diligence and selecting mutual funds, collective investment trusts or ETFs
Monitoring performance, fees and manager changes on a regular schedule
Replacing underperforming or high-cost options to maintain an efficient menu
Offering model portfolios or target-date strategies aligned with participant demographics

By engaging a 3(38) investment manager, plan sponsors transfer the fiduciary burden of investment oversight—insulating themselves from market-related lawsuits and ensuring ongoing, professional stewardship of plan assets.

5.3 Role and Responsibilities of a 402(a) Named Fiduciary

The 402(a) named fiduciary holds the ultimate decision-making authority for your 401(k) plan. Typical duties include:

Approving and amending plan documents and key design features (match formula, vesting)
Selecting, monitoring and replacing service providers (recordkeepers, TPAs, custodians)
Ensuring a documented, prudent process for decisions and maintaining governance records
Overseeing overall ERISA compliance and executing fiduciary policies

Appointing a 402(a) fiduciary moves high-level oversight to an expert, lowering your organization’s exposure to breach-of-fiduciary-duty claims and validating that plan governance meets ERISA’s rigorous standards.

5.4 Combining and Delegating Fiduciary Duties

Many sponsors find value in a hybrid structure—delegating 3(16), 3(38) and 402(a) responsibilities across multiple specialists. To coordinate effectively:

Define each party’s mandate clearly in written agreements
Establish regular touchpoints to review compliance, investment performance and service quality
Use centralized dashboards for task assignments, document storage and reporting
Map decision-making workflows to ensure no overlap or gaps in responsibility

Summit Consulting Group’s flexible model lets you mix and match fiduciary services. Whether you need full 3(16) administration, a 3(38) investment manager or a 402(a) named fiduciary (or any combination), explore our fiduciary services overview to see how we can tailor a solution that lightens your burden and strengthens your plan.

6. Key Compliance and Regulatory Obligations Under ERISA for Plan Sponsors

Running a compliant 401(k) plan means staying on top of ongoing ERISA requirements. From timely filings to participant communications, missing a deadline or poor documentation can lead to penalties, lost tax benefits or even litigation. Here are the core obligations every plan sponsor must manage:

6.1 Document Filing and Government Forms

Plan sponsors must file Form 5500 annually with the Department of Labor and IRS, providing a snapshot of plan finances, investments and operations. Deadlines usually fall seven months after the plan year ends (October 15 with an extension). Best practices include:

Starting your audit and data‐gathering process early, especially for plans over $250,000 in assets.
Coordinating with your TPA or auditor to verify census data, financial statements and Schedule C fee disclosures.
Issuing the Summary Plan Description (SPD) and any Summary of Material Modifications (SMM) to participants within 210 days of a new plan year or significant amendments.

Missing or incomplete filings risks disqualification of your plan’s tax status and hefty fines, so having a calendar and clear ownership of milestones is non‐negotiable.

6.2 Vendor Selection and Monitoring

ERISA mandates that service provider fees be “reasonable,” and sponsors must document how vendors were chosen. A structured benchmarking process ensures you can demonstrate prudence:

Issue a Request for Proposal (RFP) or Request for Information (RFI) whenever renewing key services—recordkeeping, administration, auditing.
Compare fee quotes, service levels and technology features across at least three qualified vendors.
Keep detailed records—meeting notes, scorecards and decision memos—to show why you selected or retained each provider.

Regular vendor reviews (at least every three years) and benchmarking reports not only satisfy ERISA’s duty of prudence but can also uncover cost savings or service enhancements.

6.3 Participant Notices and Disclosures

ERISA and IRS rules require a suite of annual and event‐driven notices to keep participants informed:

Qualified Default Investment Alternative (QDIA) notices before enrolling anyone in a default fund.
Safe harbor election notices (if you use safe harbor matching or nonelective contributions).
Blackout notices at least 30 days before any suspension of plan transactions.
Annual notices for automatic enrollment, fee disclosures and benchmarking summaries.

Missing these communications can trigger participant lawsuits, so sponsors should establish templates, track distribution dates and confirm delivery—whether via email, intranet or paper.

6.4 Self‐Audits and Correction Programs

Periodic self‐audits help catch and correct errors before regulators do. Under the IRS’s Employee Plans Compliance Resolution System (EPCRS), you can correct eligible mistakes—such as missed deferrals, mismatched eligibility or late deposits—and retain valuable tax benefits. To leverage EPCRS effectively:

Schedule an annual review of plan operations and compliance testing.
Engage an independent third party (an ERISA attorney or compliance consultant) to validate your findings.
Document any corrections, from amending payroll processes to making qualified non‐elective contributions for affected participants.

Proactive self‐audits demonstrate good faith and can even earn your plan a temporary “safe harbor” from IRS examination, making them a cornerstone of a robust compliance strategy.

By mastering these core ERISA obligations—filings, vendor oversight, participant disclosures and self‐audits—you protect your organization from fines and litigation and reinforce the integrity of your 401(k) plan.

7. Questions to Ask When Selecting a 401(k) Financial Advisor

Choosing the right 401(k) financial advisor starts with asking the right questions. A structured, side-by-side comparison helps you separate true fiduciaries from sales-driven brokers, clarify fee arrangements and assess whether a firm’s technology and service model align with your needs. Before scheduling interviews, develop a short list of targeted questions—this due-diligence toolkit will save time, reduce surprises and give you confidence that you’re entrusting plan assets to a qualified partner.

As you gather responses, consider scoring each answer on a simple 1–5 scale (1 = poor, 5 = excellent). Weight categories—like fiduciary commitment, ERISA expertise, tech capabilities and pricing transparency—according to your plan’s priorities. Tally the results to identify which advisors consistently rank at the top and deserve a deeper dive.

7.1 Credentials and Fiduciary Status

• Do you act in a fiduciary capacity under ERISA (3(21), 3(38) or section 402(a))?
• Are you compliant with the DOL’s Best Interest Contract Exemption (PTE 2020-02)?
• What professional designations does your team hold (CFP®, AIF®, ERPA, etc.)?
• Can you provide your Form 5500 Schedule C and 408(b)(2) disclosures for plans of our size?
• How do you identify and mitigate conflicts of interest?

7.2 Experience with ERISA and Plan Administration

• How many years have you been advising 401(k) plans, and what is the typical plan size?
• What industries and participant demographics do you serve most often?
• Can you share examples of helping clients through DOL audits or IRS corrections?
• What is your client retention rate over the past five years?
• How do you stay current on evolving ERISA regulations and IRS guidance?

7.3 Technology and Reporting Capabilities

• What online tools and portals do you provide for plan sponsors and participants?
• Do you offer real-time dashboards, mobile access and automated reporting?
• How do you integrate data with recordkeepers, custodians or payroll systems (APIs, secure file feeds)?
• What is your report frequency—quarterly, annual or on-demand?
• Can you demonstrate a sample plan health report or compliance dashboard?

7.4 References, Service Model, and Pricing Transparency

• May we speak with two current clients of similar size and industry?
• What is your standard service agreement and team structure (dedicated contact, back-up support)?
• How do you invoice for services—flat retainer, AUM, commission, or a combination?
• Are there any ancillary fees (revenue sharing, 12b-1 charges, administrative mark-ups)?
• How frequently do you provide a full fee reconciliation and certify reasonable compensation?

For additional guidance on provider selection and detailed checklists, see our guide to selecting 401(k) providers. With a clear scorecard and thorough follow-up, you’ll be well-positioned to choose an advisor who meets your fiduciary, compliance and service expectations.

8. Leveraging Technology and Automation in Modern 401(k) Advisory Services

Technology has reshaped how advisors serve plan sponsors and participants. By automating routine tasks and providing real-time insights, advisors can devote more time to strategic guidance instead of paperwork. Modern platforms combine data gathering, reporting and participant engagement into a seamless experience—reducing errors, speeding decision-making and enhancing transparency for everyone involved.

Advisors who embrace these tools deliver measurable value:

Faster onboarding: new hires can enroll in minutes rather than days.
Improved accuracy: system-generated forms cut manual entry mistakes.
Continuous oversight: dashboards flag compliance deadlines and testing issues.
Engaged participants: personalized communications keep employees informed and motivated.

Below, we explore the core components of an automated 401(k) advisory ecosystem and how each contributes to better outcomes.

8.1 Automated Data Gathering and Paperwork Generation

Gone are the days of hunting down spreadsheets and wrestling with templates. Automated data pipelines connect directly to your HR or payroll system to pull census data, deferral elections and compensation information on a scheduled basis. Once imported, the platform can:

Populate government filings (Form 5500, census reports) with a single click.
Generate Summary Plan Descriptions (SPDs), Safe Harbor notices and blackout communications from pre-approved templates.
Validate data against plan rules—catching missed deferrals or incorrect eligibility before they become testing failures.

By eliminating manual exports and formatting, you reduce the risk of late filings, human error and compliance slip-ups. Your advisor can review system-compiled reports instead of chasing down hard copies.

8.2 Online Participant Portals and Real-Time Reporting

Participants and sponsors alike expect instant access to plan information. A modern portal offers:

Participant dashboard: account balances, investment performance, target-date fund comparisons and personalized projections.
Sponsor dashboard: plan health metrics, participation rates, fee summaries and nondiscrimination testing status.
Interactive tools: retirement income calculators, “what-if” modeling and easy update of deferral elections.

With mobile-friendly access, employees can review their options on the go, and sponsors can track KPIs in real time. Secure messaging modules let advisors push targeted reminders—like catch-up eligibility alerts—directly to individuals.

8.3 Integration via APIs with Custodians and Recordkeepers

File uploads and batch feeds are being supplanted by Application Programming Interfaces (APIs) that enable two-way, encrypted data exchange. Key benefits include:

Instant trade execution: investment changes made in the advisor’s portal flow directly to the recordkeeper without manual intervention.
Reconciliation automation: daily balance and transaction data sync reduces end-of-month errors.
Unified reporting: aggregated holdings, fee disclosures and performance metrics pull from all custodians into one central view.

An API-driven architecture accelerates turnaround times—for example, a model portfolio adjustment can propagate across thousands of accounts in minutes rather than days.

8.4 Benefits and Potential Drawbacks

Adopting automation delivers clear advantages:

Scale: handle growing headcounts or multiple locations without proportional increases in staff.
Consistency: standardized processes enforce compliance and documentation standards.
Transparency: audit trails for every action support ERISA recordkeeping requirements.

Yet, sponsors should be mindful of potential trade-offs:

Vendor lock-in: custom integrations may make it harder to switch providers later.
Implementation costs: initial setup and data mapping require investment of time and resources.
Training needs: staff and participants may need guidance to navigate new interfaces.
Security considerations: robust cybersecurity measures and periodic penetration testing are essential to protect sensitive financial data.

Balancing these factors ensures that automation becomes an enabler, not an obstacle, on your path to a more efficient and participant-focused 401(k) plan.

9. Evaluating Advisor Performance: Benchmarks and Reporting

To make sure your 401k financial advisor is delivering on promises—and truly adding value—it’s essential to measure results against clear benchmarks and maintain regular reporting. Establishing a framework for performance evaluation helps you identify strengths, uncover areas for improvement and demonstrate fiduciary prudence. By combining objective metrics with structured reviews and transparent communication, you’ll keep your advisor accountable and ensure your plan stays on track.

9.1 Investment Performance Benchmarks

Selecting the right investment benchmarks is the first step in gauging portfolio success. Rather than comparing your plan’s funds to broad-market indices only, choose peer-group benchmarks that reflect similar asset classes, risk profiles and time horizons. For target-date series, this might mean evaluating against a Morningstar target-date peer group; for equity funds, perhaps an S&P 500 or Russell 3000 index.

Key considerations include:

Time Periods: Review 1-, 3- and 5-year net-of-fee returns to capture both short-term trends and longer-term consistency.
Peer Groups: Use fund-category composites that match style, market cap and geography.
Net-of-Fee Comparison: Focus on returns after all advisory and fund expenses to understand true participant outcomes.

By anchoring results to appropriate benchmarks, you’ll spot underperformers quickly and empower your advisor to address lineup gaps or reallocate assets.

9.2 Fee and Service Benchmarking Reports

Cost is a major driver of retirement success, so routinely benchmarking fees and services ensures your plan remains competitive. Engage third-party benchmarking studies—such as those published by leading industry consultants—to compare your total plan expenses (including advisory fees, recordkeeping and fund fees) against similar plans.

A thorough fee report should:

Highlight Total Expense Ratios: Show combined administrative, investment and advisory costs as a percentage of assets.
Compare to Percentiles: Position your plan’s all-in fees at the 25th, 50th and 75th percentiles of peer plans by size and industry.
Evaluate Service Levels: Rate the scope and quality of services—participant education, reporting cadence, portal features and compliance support.

Regular cost benchmarking not only uncovers potential savings but also reinforces to stakeholders that you are meeting your ERISA duty of prudence.

9.3 Regular Performance Reviews and Plan Adjustments

Benchmarks and reports are only valuable when paired with scheduled performance reviews. Aim for quarterly check-ins on key metrics and an annual deep dive to align on strategy and action plans.

A typical review agenda might include:

Fund Performance: Assess each fund against its benchmark and peers, identifying replacements or consolidations.
Participation and Deferral Trends: Track enrollment rates, average deferral percentages and catch-up usage.
Compliance Snapshots: Review testing results (ADP/ACP, top-heavy) and notice distributions.
Action Items: Agree on any fund lineup changes, communication campaigns or design tweaks needed before the next cycle.

Involve your core team—HR, finance, executive sponsor—and document decisions in a meeting memo, complete with timelines and responsibility assignments.

9.4 Documenting and Communicating Results

Transparent reporting and documentation underpin robust governance. Each performance review should culminate in a concise report featuring:

Executive Summary: High-level wins, challenges and recommended next steps.
Detailed Metrics: Side-by-side charts of fund returns, fee comparisons and participation statistics.
Service Scorecard: Ratings for advisor responsiveness, technology performance and compliance support.
Action Plan: Specific tasks, owners and deadlines for follow-up.

Distribute the report to plan committees and executive stakeholders, and archive minutes and documents in a central fiduciary file. This audit-ready trail not only fulfills ERISA recordkeeping requirements but also demonstrates to auditors and participants that your team is managing the plan with diligence and transparency.

By embedding rigorous benchmarks, regular reviews and clear documentation into your advisor evaluation process, you’ll ensure that your 401(k) plan performs efficiently—and that your advisor remains a true partner in achieving retirement success.

10. How Expert Advisors Can Reduce Your Fiduciary Liability and Administrative Burden

Handing over complex plan duties to seasoned professionals does more than free up your team’s time—it also transfers significant fiduciary risk from your organization to experts. By appointing advisors under ERISA sections 3(16), 3(38) or as a 402(a) named fiduciary, you can dramatically lower the odds of a breach claim while ensuring daily operations run smoothly.

Specialized firms leverage economies of scale, negotiating better fees and streamlining processes to reduce plan expenses by 32%–65% compared with standalone arrangements. Clear service agreements, with defined scopes and ERISA safe-harbor protections, provide sponsors with professional negligence coverage and peace of mind.

Here’s how expert advisors deliver these benefits.

10.1 Liability Reduction Through Delegation

Delegating key fiduciary responsibilities shifts legal exposure from the plan sponsor to the expert advisor. A 3(16) administrator assumes recordkeeping, testing and government filings; a 3(38) investment manager takes full discretion over the fund lineup; and a 402(a) named fiduciary oversees high-level governance and plan design. Industry data shows that sponsors who outsource these roles can reduce their ERISA liability by up to 98%. With written agreements defining each party’s duties, you benefit from robust safe-harbor protections and professional liability coverage.

10.2 Administrative Support for Daily Operations

Expert advisors manage routine tasks that often overwhelm in-house staff:

Integrating payroll feeds and census data for accurate deferral tracking
Conducting nondiscrimination and compliance testing (ADP/ACP, top-heavy)
Preparing and filing Form 5500, SPDs, SMMs and blackout notices
Facilitating participant loans, distributions and hardship withdrawals
Coordinating government paperwork and critical deadlines

By offloading these to-dos, your HR and finance teams can stay focused on strategy rather than chasing forms and calendar alerts.

10.3 Cost Savings and Economies of Scale

Pooling assets from multiple plans gives expert advisors negotiating leverage with recordkeepers, custodians and fund providers. Typical plans realize cost reductions of 32%–65% compared to standalone rates. Beyond lower fees, advisors often include audit-defense support—drafting responses for DOL or IRS inquiries without hefty legal retainers. The combined effect is a leaner budget and more resilient plan infrastructure.

10.4 Maintaining Relationships with Existing Providers

Engaging an expert advisor doesn’t mean abandoning your current custodians, recordkeepers or payroll vendors. A skilled advisor integrates with your existing ecosystem—via secure APIs or bulk data feeds—while filling gaps in fiduciary expertise. This hybrid approach preserves the partnerships you value, minimizes transition costs and ensures continuity for participants and plan administrators alike.

Bringing It All Together

Running a 401(k) today requires more than spreadsheets and faith in generic advice. From defining your advisor’s role and insisting on PTE 2020-02 fiduciary standards to understanding fee structures, contribution limits and the distinct benefits of 3(16), 3(38) and 402(a) services, each insight builds toward a plan that works harder for you and your participants. When you select an advisor, you’re not simply hiring an investment expert or administrator—you’re inviting a partner to share liability, streamline administration and amplify cost savings through proven economies of scale.

By following a disciplined process—assessing advisor credentials, clarifying compensation models, benchmarking performance, leveraging automation and staying on top of ERISA filing requirements—you’ll protect your organization from compliance pitfalls and give employees a path to retirement readiness. Regular performance reviews, clear scorecards and transparent reporting keep your advisor accountable, while proactive self-audits and EPCRS corrections help you spot and fix issues before regulators do.

Ultimately, the goal is simple: turn what was once a back-office burden into a competitive advantage for recruitment, retention and financial wellness. With the right partner, you can reduce your ERISA exposure by up to 98%, cut plan expenses by as much as 65%, and free your team to focus on strategic initiatives rather than paperwork and deadlines.

Ready to see how expert fiduciary services can simplify compliance, lower your costs and safeguard your plan? Explore how Summit Consulting Group’s homepage can transform your 401(k) experience with tailored 3(16), 3(38) and 402(a) solutions.