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Investment Monitoring

Investment monitoring and benchmarking are essential to managing a 401(k) plan. These activities involve regularly reviewing the performance of the plan's investments and comparing them to relevant benchmarks to ensure that the plan meets its investment objectives.

  1. Establish Investment Objectives: Define the investment goals and objectives for the 401(k) plan, such as target returns, risk levels, and asset allocation targets.

  2. Develop Investment Policy Statement: Create an Investment Policy Statement (IPS) that outlines the investment strategy and guidelines for the plan. The IPS should also define the benchmarks that will be used to evaluate the performance of the plan's investments.

  3. Monitor Performance: Regularly review the performance of the plan's investments to ensure that they meet the investment objectives and guidelines outlined in the IPS. This includes analyzing each investment's returns, risks, and fees.

  4. Compare to Benchmarks: Compare the performance of the plan's investments to relevant benchmarks, such as market indices or peer group averages, to evaluate their relative performance.

  5. Communicate with Plan Participants: Keep plan participants informed about the performance of the plan's investments and any changes to the investment strategy. This can help them make informed decisions about their retirement savings.

By regularly monitoring and benchmarking the performance of a 401(k) plan's investments, plan sponsors can ensure that the plan is meeting its investment objectives and provide participants with a better chance of achieving their retirement savings goals.

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