| To ensure a 401(k) plan is up to date, CPAs should advise clients or employers that sponsor such plans to 
Maintain an investment policy statement. This document establishes the plan’s criteria for monitoring investments, the performance expectations, the process of reviewing investments and the benchmarks to guide investment changes.
Provide a diversified menu of investment options. Plan sponsors should offer a minimum of 12 choices to allow participants to diversify across all investment categories—value, blend, growth and fixed income.
Offer investments from a variety of mutual fund families. Companies usually allow employees to select investments from among several families, not just one: This provides additional diversification. Also, as fund families have different investment philosophies and areas of expertise, they can include the top performers in each investment category. For participants who have no interest in actively monitoring their investments, providing asset-allocation funds based on age and risk tolerance also is a good option.
Review investment selections at least annually to ensure they continue to beat established benchmarks. Questions plan sponsors should ask themselves include 
What are the criteria for adding and deleting investments?
When was the last time the plan added or deleted an option?
A plan that hasn’t recently added or deleted an investment choice may signal that it doesn’t replace underperforming funds on a timely basis.
Create a retirement plan committee. Having a group of participants collect and act on employee feedback will help staff feel more involved in the process. Generally, an individual responsible for the retirement plan, such as the business owner, CFO or human resources director, will coordinate the committee. Size will vary, depending on the number of workers in the company; one scenario might consist of an employee from each department.
Provide online advisory services to enrollees to help them with their investment allocation decisions. Plans can offer online enrollment and provide educational tools, retirement calculators and transaction capabilities, such as changing investment allocations.
Issue timely participant statements. Information an employee receives two months after a quarter ends has little value in helping him or her react to changing market conditions. Many plans today offer Internet access, providing up-to-date participant balances and investment details. This is especially helpful, for example, if a participant needs a current statement for lenders when refinancing a mortgage.
Offer participants automatic rebalancing. Employees with conservative or moderate risk tolerance who didn’t rebalance after the strong equity gains of the 1990s were probably caught with a more aggressive portfolio than they had wanted. For example, an employee with a 50/50 allocation in stocks and bonds may have seen his or her portfolio shift to 70/30 when stocks were rising much faster than bonds. Automatic rebalancing—returning the employee’s fund allocations to their initial percentages after a period when investments performed at different rates— ensures participants maintain their original allocations. By rebalancing, a participant sells a portion of his or her winners and reinvests in the losers, essentially selling high and buying low. | 
