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More Complex 401(k) Plans
November 11, 2005 Most law firm 401(k) plans offer participants a limited number of investment options. The prevailing wisdom has been that simplicity increases staff participation and limits the firm’s fiduciary liability. Recently, however, larger law firms are moving toward more complex options through brokerage and mutual-fund windows.
These windows permit participants to invest in a wider range of stocks, bonds and mutual funds outside the plan’s standard investment options. Generally, they work like normal brokerage accounts except that they can only be funded by transferring money from a 401(k) plan. The advantage for participants is greater flexibility in managing their retirement savings. The downside is that most plans pass on the broker set up and transaction fees to the participant and unsophisticated investors could deplete significant portions of their accounts in commission payments.
There are no statistics on law firms but, overall, 16 percent of 401(k) plans offer a self-directed brokerage account, However, in plans where the option is offered, only 2 percent of the total assets are invested in these accounts. The experience of law firms has been greater use of the account, due to the greater sophistication of the participants. Dykema Gossett, a Detroit based 370 lawyer firm that has been offering the option for five years, has 9 percent of its assets invested in self-directed investments. | 
