Employers Can Override Your 401(k) Investment Choices

Your nest egg could be shifted into funds you didn't choose.

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"An employer, acting as a fiduciary or trustee, can change participant investment choices and should, if the participant's choices are not prudent or appropriate," says Matthew Hutcheson, an independent pension fiduciary. "A trustee can override a participant decision at any time. A trustee should override participant decisions if those decisions are clearly imprudent."

Although some employers have expressed interest in correcting their workers' poor investment choices, few have yet taken direct action to correct inappropriate diversification. "There is a degree of paternalism associated with it. If we look at the allocations that employees have, there have been more cases than not that those allocations and selections of funds aren't necessarily the best things for them," says Michael Malone, managing director of MJM401k, a 401(k) consulting company in Phoenix. "But if you want to maintain your existing elections, you can move back into any elections you want."

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