We all know the minimum number of distinct and materially different investment options all 401(k) plans seeking the 404(c) safe harbor provision must have. This answer is three.
But until May 7, 2012, in its FAQ on the new Fee Disclosure Rule, the DOL has never opined on what the maximum number of options in a 401(k) should be. The number may just shock a number of 401(k) plan sponsors, in particular, those administering some of the largest plans.
Long ago, in a world motivate by the ideal rather than the banal, academic researchers sought the answer to this simple question: What is the optimal number of stocks the perfect portfolio should hold? The number crunchers of the day called this exercise "portfolio optimization" and its pursuit has a long and variegated history (summarized in most entertaining fashion here).
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Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
