Who Controls Your Retirement Plan Investment Menu (and Why it Matters)
When evaluating retirement plan providers, look for investment platforms that give you maximum flexibility. Discover what features give you control over investment menus, costs and the participant experience.
Choosing the right retirement plan provider for your business requires careful evaluation of investment options. The stakes are high because the quality, variety and cost of your investment menu can directly impact how well your employees' retirement savings grow.
But many retirement plan participants don't realize that the investment lineup is selected by the plan sponsor, not the recordkeeper.
This flexibility to customize the investment lineup means you can design a plan that reflects your workforce's demographics and values. Understanding what makes an investment platform strong, and what matters most to your employees, can help you cut through the noise and focus on the features that will benefit them while maximizing plan performance.
Investment limitations participants see
You select a vetted menu based on your participants' needs, often working with your company's financial or investment advisor to choose high-quality, affordable options.
While some platforms may offer access to thousands of investment options, participants typically see a streamlined menu of 20-30 funds, making the process less overwhelming. This approach helps participants make smarter decisions while still providing options for their varied needs.
If a participant wants an investment that's not in the current lineup, you can often work with your plan sponsor to add a self-directed brokerage account to the plan. The key is balancing flexibility with thoughtful selection to serve participants' best interests.
Responding to participant investment questions
You'll likely field questions from participants about investment options. Here are some ways to address these concerns.
Q: What should I tell participants who want more investment choices?
A: Explain that the vetted menu balances choice with simplicity. It provides diversified, cost-effective investments across all major investment types without overwhelming participants with too many options.
Q: A participant can't find a specific fund or investment style. How should I respond?
A: Check if the plan offers a brokerage window—essentially a self-directed option—for access beyond the core menu. If not, explain that your team selected funds based on quality, low costs and comprehensive coverage.
Q: Participants think the recordkeeper is limiting their choices. How can I clarify this?
A: Emphasize that the recordkeeper provides the platform and access to thousands of investment options, but your company selected which specific funds appear in the menu. This is your legal duty as the plan sponsor.
Q: How can I know if my menu is too limited?
A: Many well-designed plans offer 20-30 funds covering all essential investment types. What matters is whether participants can build properly diversified portfolios for their retirement timelines.
The makings of a solid retirement plan investment platform
A strong retirement plan investment platform should offer several key features:
Streamlined menus that make it easy for participants to build diversified portfolios
Clear reporting on performance, fees and how your plan compares to others
Access to professionally managed options that provide affordable investments aligned with different retirement timelines and risk profiles
Investment variety that works for different ages and situations
Open fund architecture: The foundation of investment flexibility
The gold standard in retirement plan investment platforms? Open fund architecture provides access to extensive investment options from various managers, without the provider pushing specific investments that benefit them.
The open fund architecture model offers real advantages, including:
Continuity. You can maintain your current investment lineup when changing recordkeepers, avoiding disruptive transitions.
Customization. Every workforce is different. Open architecture allows plan menus to reflect participants' varying age ranges, risk tolerances and more.
Advisor alignment. Financial advisors can implement their investment philosophy and screening process without platform limitations.
Screened investment tiers: Simplifying without limiting
For plan sponsors who want straightforward guidance, screened investment tiers offer a middle path. These tiers organize already-vetted funds and provide a simplified selection process while maintaining access to high-quality investments.
This approach benefits smaller plans or those without dedicated investment advisors, offering expert-level vetting without having to review thousands of options.
How ADP supports investment decisions
At ADP, our open fund architecture provides access to over 13,000 investment options from approximately 180 investment managers. We're an independent recordkeeper, which means we maintain investment objectivity without pushing our own funds or hidden agendas.
Depending on your plan size and needs, you can choose between maximum customization through our open platform or simplified selection through our screened investment tiers. For plans seeking additional protection, ADP offers 3(38) and 3(21) services, providing professional fund selection and ongoing oversight through ADP Strategic Plan Services and Mesirow.
Our investment platform works with different plan types and advisor relationships while giving you the performance reporting, fee transparency and monitoring tools you need to meet your legal obligations.
Ready to explore how investment flexibility can benefit your plan?
Connect with an ADP retirement services specialist or call (800) 432-401K to learn more.
Unless otherwise disclosed or agreed to in writing with a client, ADP, Inc. and its affiliates (ADP) do not endorse or recommend specific investment companies or products, financial advisors or service providers; engage or compensate any financial advisors to provide advice to plans or participants; offer financial, investment, tax or legal advice or management services; or serve in a fiduciary capacity with respect to retirement plans.
In assembling and presenting its investment platforms, ADP, Inc. is not undertaking to provide impartial investment advice or to give advice in a fiduciary capacity. Investment options are available through the applicable entity(ies) for each retirement product. Investment options in the “ADP Direct Products” are available through either ADP Broker-Dealer, Inc. (ADP BD), Member FINRA, an affiliate of ADP, Inc., One ADP Blvd, Roseland, NJ 07068 or (in the case of certain investments) ADP, Inc. Only registered representatives of ADP BD may offer and sell ADP retirement products or speak to retirement plan features and/or investment options available in such ADP retirement products. All investments involve risk, including loss of principal, and there is no guarantee of profits. Investors should carefully consider their objectives, risk tolerance, and time horizon before investing.
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