What an Empower 401(k) Plan Review Actually Examines

Many plan sponsors who engage Empower as a recordkeeper assume the recordkeeper is also handling fiduciary oversight. That assumption is the source of more compliance risk than any single underperforming fund. Empower administers the plan. The plan sponsor is the fiduciary. A proper plan review is what closes that gap.

Who Is Responsible When an Empower 401(k) Plan Goes Unreviewed

The plan sponsor. Not the recordkeeper. Not the payroll provider. Not the broker who set the plan up six years ago and has not been heard from since. Under ERISA, the named plan fiduciary, which is almost always a company officer or a committee of officers, holds personal liability for prudent plan oversight.

Empower handles recordkeeping, custody, payroll integration, participant statements, and plan administration. Those functions are critical and they are operationally sound. They are also not fiduciary functions in the ERISA sense. Decisions about which funds to include in the lineup, whether the fees being paid are reasonable for services received, and whether the plan is actually serving participants well, those decisions sit with the sponsor.

This responsibility does not get lighter because a recordkeeper of Empower’s scale handles the day-to-day. It actually gets sharper, because the volume of available data makes it harder to claim a sponsor did not have visibility into a problem.

What Does an Empower 401(k) Plan Review Include?

An Empower 401(k) plan review includes a documented benchmarking of total plan cost against similar-size plans, a fund-by-fund evaluation of the investment lineup against peer benchmarks, a check of the plan’s fiduciary process and documentation, and a review of participant-level outcomes including participation, deferral, and asset allocation patterns.

The output of a proper review is not a verdict. It is a written record showing that each domain was examined, that findings were considered by the responsible fiduciary, and that any actions taken were prudent in light of those findings. That written record is the documentation that turns a plan sponsor’s good intentions into a defensible fiduciary process.

Total Plan Cost: What the Review Actually Measures

Plan cost is the most common entry point for a review and the most frequently misunderstood number on the entire plan. Sponsors often quote a single percentage and assume it represents the all-in cost. It rarely does. A complete cost picture requires breaking the total into its layers and benchmarking each layer separately.

The first layer is recordkeeping and administration. Empower charges this either as a per-head fee, an asset-based percentage, or a hybrid of the two. For plans in the $5 million to $50 million range, the asset-based component has historically tended to compress as plan assets grow. Sponsors who negotiated their pricing five years ago at a lower asset level may be paying rates that no longer reflect what their plan should cost today.

The second layer is investment expense. Every fund in the lineup carries an expense ratio. The weighted average across the lineup is what participants actually pay each year. Lineups that lean heavily on actively managed share classes can carry weighted averages well above what a passively tilted lineup would produce. The question is not which is better in the abstract. The question is whether the active premium is justified by performance and whether participants are paying a higher share class than the plan size warrants.

The third layer is revenue sharing. Some funds in the lineup may pay revenue back to the recordkeeper, which offsets recordkeeping fees. This is not inherently a problem, but it must be disclosed, understood, and accounted for in the total cost calculation. A plan that looks cheap on the recordkeeping line may actually be paying for that pricing through fund selection.

An honest plan review reconciles all three layers and produces a total all-in cost figure that can then be benchmarked against similar plans. Without that reconciliation, the sponsor is benchmarking a partial number against a partial peer set, which is not benchmarking at all. A deeper treatment of this benchmarking process appears in the firm’s broader workplace retirement plan optimization framework.

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Investment Lineup Review: What to Look For

The investment lineup is where fiduciary risk concentrates and where plan sponsors most frequently rely on the recordkeeper to do work that is, in fact, the sponsor’s responsibility. Empower offers a wide universe of funds. The plan sponsor decides which subset of that universe appears on the menu participants actually choose from.

A rigorous lineup review looks at three questions for every fund. First, has the fund tracked or beaten its appropriate benchmark over rolling 3, 5, and 10-year periods? Second, is the share class on the menu the lowest-cost share class the plan qualifies for given its asset size? Third, does the fund fill a distinct role in the lineup, or is it duplicating coverage that is already provided by another option?

The first question is performance discipline. The second is share-class discipline. The third is menu construction. All three are documented fiduciary obligations and all three are routinely missed when plan reviews are conducted casually or not at all.

How Often Should an Empower 401(k) Plan Be Reviewed?

Many fiduciary practitioners recommend reviewing an Empower 401(k) plan no less than annually, with quarterly check-ins on investment performance and a separate fee benchmarking study conducted every three years. The cadence matters less than the documentation. A reviewed-but-undocumented plan looks the same in litigation as an unreviewed plan.

The annual review covers all four domains: cost, lineup, fiduciary process, and participant outcomes. The quarterly check is narrower and focuses on whether any fund in the lineup has fallen onto a watchlist for performance or risk reasons. The triennial fee benchmarking is what surfaces pricing drift, which has tended to develop quietly as plan assets grow but pricing terms do not adjust.

Fiduciary Process: The Document Trail That Protects the Sponsor

The single most defensible position a plan sponsor can hold in a fiduciary dispute is a documented prudent process. Not a perfect outcome. A documented process. ERISA litigation has long focused on whether the fiduciary did the work, not whether they got the answer right.

For an Empower-administered plan, the fiduciary documentation that matters includes:

• A current investment policy statement, signed and dated, that sets the criteria by which funds are added, retained, and removed.
• Committee meeting minutes capturing each periodic review, including which funds were discussed, what data was reviewed, and what decisions were made.
• Fee benchmarking studies on a regular cadence.
• Documentation of any service provider review, including whether the sponsor considered alternative recordkeepers and why Empower was retained.

None of this requires changing recordkeepers or restructuring the plan. It requires building the discipline of documenting decisions as they are made, on a schedule, in writing. Many sponsors find that this discipline alone, brought into a plan that was previously running on autopilot, materially reduces the company’s exposure to participant complaints and DOL inquiry.

For investment-side fiduciary thinking that translates from individual portfolios to plan menus, the firm’s approach to risk management in investing applies the same prudent-process logic at the security level that ERISA requires at the lineup level.

Participant Outcomes: The Question the Lineup Is Supposed to Answer

A plan that is technically compliant but functionally not serving participants is still a problem. The fourth domain of a complete review asks whether the people the plan exists for are actually retiring well from it.

The metrics that matter are participation rate among eligible employees, average deferral percentage by tenure and compensation tier, asset allocation patterns by age, and projected income replacement at retirement. Empower’s reporting tools surface most of this data directly. The plan sponsor’s job is to actually look at it and ask whether the patterns make sense.

Several findings tend to surface in this domain. Participation gaps in younger or lower-paid populations may suggest the enrollment experience is failing them. Concentration of assets in a single asset class, often a stable value or money market default, suggests participants are not engaging with allocation choices. High balances in conservative options for participants decades from retirement are behavioral signals that more education or a different default may be warranted.

For high-balance participants, participant outcomes also include whether the plan itself elects to offer a self-directed brokerage account. Empower supports SDBA access through Schwab as a platform capability across the plans it administers. Whether a specific plan actually offers SDBA to participants is a plan sponsor decision, governed by the plan document and the fiduciary review process. Where the sponsor’s review supports adding the feature, qualifying high-balance participants gain access to individually managed accounts through Schwab without rolling assets out of the plan. Senior executives and other high earners whose assets concentrate in the plan typically make up the population this election serves.

What Action Looks Like After the Review Is Complete

The point of a plan review is not the report. The point is what happens next. A finding without an action is a finding that documents the fiduciary’s awareness of a problem without showing the fiduciary did anything about it. That is materially worse than not running the review at all.

If cost benchmarking surfaces that the plan is paying above the peer median, the action may be a renegotiation with Empower, a request for a lower share class, a fee restructuring, or a service-provider RFP. Any of those is a defensible response. None of them requires changing recordkeepers if the analysis supports retention.

If the lineup analysis surfaces an underperforming fund, the action is a watchlist designation with a defined review date, not necessarily an immediate replacement. Underperformance over a 12-month window is rarely sufficient grounds for replacement under prudent process standards. Underperformance sustained over three to five years against a relevant benchmark is a different story.

If participant outcomes show a participation gap or low average deferrals, the action may be an enrollment campaign, a default rate increase, an automatic escalation feature, or a re-enrollment event. These are operational changes, not fiduciary failures, but they are documented as part of the prudent process.

Some plans benefit from adding an independent advisor as broker of record specifically to conduct ongoing reviews and document the fiduciary process. This is the role HCM plays for plan sponsors who want professional fiduciary support without changing recordkeepers. The plan stays at Empower. The recordkeeping arrangement does not change. The fiduciary process gets the discipline and the documentation it has historically lacked.

Plan-level decisions about lineup quality and cost are connected to investment-level decisions sponsors face when they advise their own retirement contributions. The same evaluation framework that produces a defensible fund lineup also informs how an individual constructs a portfolio. The firm’s broader treatment of this connection appears in its investment portfolio construction approach, and the question of how fund choices interact with after-tax outcomes is examined in the firm’s tax-efficient investing framework.

Why Many Plans Go Years Without a Real Review

Three reasons surface most often. The plan sponsor assumes the recordkeeper is also handling fiduciary oversight, which it is not. The plan sponsor was sold the plan years ago by a broker who has not been actively servicing the account, which means there is no advisor systematically reviewing it. Or the plan sponsor knows the review is overdue but does not have an internal capability or external relationship in place to actually run it.

None of these reasons is a defense. Under ERISA, the fiduciary obligation does not pause because the sponsor lacked a process or an advisor. The obligation runs continuously. A plan that has not been formally reviewed in three or more years is, regardless of how well it may be performing, operating without the documentation that protects the sponsor in a participant complaint or DOL inquiry.

The remedy is straightforward. Engage a qualified independent advisor as broker of record. Establish or update the investment policy statement. Set a review cadence and document each cycle. Build the file. The plan continues to run on Empower. The fiduciary risk that has accumulated over years of informal oversight begins to compress. This same logic, applied to plans across the major recordkeepers, is the foundation of HCM’s 401k and workplace plans service for plan sponsors.

The Preserve. Strengthen. Grow.™ investment philosophy that anchors the firm’s individual client work translates directly to plan-level oversight: preserve the plan’s regulatory standing through documented prudent process, strengthen the lineup and cost structure where benchmarking justifies action, and grow participant outcomes through deliberate plan design.