401(k)s can be confusing. Here's our step-by-step guide on how to add a climate-friendly option to your 401(k) plan
The process for adding a new fund to a 401(k) plan can vary depending on company size. If you're a leader at a small company, you may be able to email your 401(k) provider directly and ask them to add SPFFX to your lineup. If you're at a bigger company, there may be a more formal process to follow.
Most mid-size and large companies have a 401(k) committee that is made up of the company’s head of benefits, the head of human resources, the head of finance, and an external 401(k) advisor. 401(k) advisors are just like financial advisors, but they specialize in advising companies on what funds to put in their 401(k) lineups. The 401(k) advisor typically leads quarterly committee meetings, where they discuss whether to make any changes to the plan. If this sounds like your company, a good place to start is to email your HR manager - check out our example email to HR below.
A smaller company may not have its own 401(k) committee, but instead outsource some part of what is known as its Fiduciary Duty to an external company. That company has its own 401(k) committee that acts on your company's behalf. In that case, the outsourced company likely follows a similar process to what a bigger firm would follow in-house. Asking that outsourced committee to add SPFFX to its lineup can have a big impact in that it can make climate-friendly investing available not only to you and your colleagues, but to every employee of every company that uses that firm for its 401(k). Check out our example email to 401(k) providers below.
The 401(k) fund lineup decision-making process
The 401(k) Committee meets quarterly
Participants typically include the company’s head of benefits, the head of human resources, the head of finance, and an external 401(k) advisor.
The Committee discusses whether to make changes
The external 401(k) advisor typically runs the meeting, flagging funds that have underperformed compared to their peer group and recommending alternatives.
The 401(k) advisor presents several fund options
The 401(k) advisor typically analyzes the appropriateness of new funds for the lineup by looking at fund’s performance and fees compared to its peer group, and factors like who manages the fund.
The Committee discusses employee requests
The head of benefits typically informs the 401(k) advisor ahead of the meeting if employees have been asking for specific options in their 401(k), and the advisor comes prepared to discuss the requests.
The Committee decides
The committee then discusses what the 401(k) advisor has presented, typically keeping in mind a document they’ve created called the Investment Policy Statement, and decide what funds to add and remove from the lineup.
Employees are notified
Disclosures are sent to employees about the new funds that are being added, and 30 days later the new funds are added.
401(k) decision makers
1.
Chief Financial Officer
2.
Head of HR
3.
Benefits Manager
4.
External 401(k) Advisor
If you are interested in getting a climate-friendly investment option into your company’s 401(k) plan, these may be the people to talk to about your company’s process for adding new funds to the lineup and how to file a request for a new investment option.
What you can do now
We have made a few tools to help you take the next step in getting a climate-friendly investment option onto your 401(k) menu. Are you a key decision-maker at your company? Check out our guide on how to email your 401(k) provider about adding a climate-friendly option to your plan. Are you an employee at a big company? You might find our example email to HR helpful.
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