What key feature should employers consider when selecting investment options for a 401(k) plan?

When selecting investment options for a 401(k) plan, it is essential to focus on options that provide clear performance metrics. This is crucial because clear performance metrics allow employers and participants to assess how well the investments are performing over time in relation to benchmarks or targets. Performance metrics can help participants make informed decisions regarding their retirement savings, enhancing their understanding of potential risks and rewards associated with different investment choices.

Additionally, having clear performance metrics supports fiduciary responsibilities, ensuring that employers can demonstrate that they are acting in the best interest of plan participants. Employers can evaluate not just the past performance of the investment options but also their consistency and ability to meet the investment goals of the participants.

While complexity and diversity in investment options can be beneficial, they should not come at the cost of clarity. Investment options with overly complex strategies may confuse participants rather than aid their decision-making processes. The cost of the funds is also an important consideration, but it should not be the sole criterion; low-cost options must also show clear performance data to justify their selection. Lastly, excluding funds based solely on past performance issues might ignore the evolving nature of investment strategies and market conditions, which may not be accurately reflected in historical performance data.

Overall, prioritizing clear performance metrics equips both