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If you’re a business owner or an HR leader, you’ve probably heard the phrase "set it and forget it" more times than you can count. It’s a tempting philosophy, especially when it comes to your company’s 401(k) plan. You’ve got a business to run, people to manage, and a bottom line to protect. The last thing you want to do is spend your Sunday night poreing over expense ratios and standard deviations.
But here’s the cold, hard truth: in the world of retirement planning, "set it and forget it" is a recipe for mediocrity: or worse, a fiduciary liability.
At Castle Rock PEP, we believe that your employees' retirement savings deserve better than "fine." That’s why we just wrapped up our Fourth Quarter 2025 investment review. For most plan sponsors, a quarterly review is a "check the box" exercise. For us, it’s an opportunity to take out the trash and level up the portfolio.
Today, I want to pull back the curtain on how we make these decisions. We don't use a crystal ball or a "gut feeling." We use data: specifically, the Fi360 Fiduciary Score®: to ensure that every fund in the Castle Rock PEP earns its keep.
What is the Fi360 Score? (And Why Should You Care?)
Most people find financial metrics about as exciting as watching paint dry. I get it. But the Fi360 score is different because it’s intuitive. Think of it like a golf score: lower is better.
The Fi360 database evaluates thousands of investments across nine different fiduciary criteria, including regulatory oversight, track record, assets under management, manager tenure, and (of course) performance and fees.
- A score of 0 is a perfect "hole-in-one." It means the fund meets or exceeds every single fiduciary standard.
- A score of 100 is the equivalent of hitting your ball into the water hazard on every single hole.
When we see a fund’s score start to climb, it’s a signal that something is wrong. Maybe the manager left, maybe the fees have become uncompetitive, or maybe the performance has consistently lagged behind its peers. Whatever the reason, we don't wait for things to get worse. We take action.
Out with the Old: The Q4 "Cleaning"
During our latest review, two funds in our lineup hit our "watch list" threshold. While they weren't "bad" funds in the traditional sense, they were no longer meeting the high standards we set for a pooled employer plan (PEP).
Here is exactly what we changed and why:
1. International Equity Swap
- The Departure: MFS International Equity Fund Class R6 (MIEIX)
- The Replacement: DFA Large Cap International Portfolio Institutional Class (DFALX)
MIEIX had been a solid performer for a long time, but recently, its Fi360 score climbed to 48. The veteran comanager since 2009, Daniel Ling, is retiring at the end of June, and the fund's performance has ranked in the bottom decile since his replacement joined the management team. In the world of institutional investing, a 48 is "middle of the pack." When our clients are trusting us to build a world-class 401(k), "middle of the pack" isn't good enough.
We replaced it with DFALX, which currently boasts a perfect Fi360 score of 0. Not only does Dimensional Fund Advisors (DFA) have a legendary reputation for their factor-based investing approach, but the performance gap was impossible to ignore. In our recent analysis, DFALX outperformed the outgoing MFS fund significantly while maintaining a lower internal cost.
2. Materials & Natural Resources Swap
- The Departure: Vanguard Materials Index Fund Admiral Shares (VMIAX)
- The Replacement: PGIM Jennison Natural Resources Fund - Class R6 (PJNQX)
This swap might surprise some people. Vanguard is a household name, and for good reason: they are the king of low-cost indexing. However, being low-cost doesn't always mean you are the best option for your participants, especially in specialized sectors like Materials and Natural Resources.
VMIAX had seen its Fi360 score balloon to 60. When an index fund starts scoring that poorly, it usually means the sector it's tracking is being dominated by active managers who can navigate the volatility better than a passive basket of stocks.
By switching to PJNQX (which also carries a perfect 0 score), we are moving from a lagging index to an "Institutional Quality" active manager—and we have specific reasons for that selection:
- Global natural resources growth mandate: The strategy typically keeps 80%+ of assets in natural resources companies around the world, not just the U.S.
- A real-assets equity diversifier: It helps diversify portfolios away from U.S. equity concentration and mega-cap tech dominance, while still staying in a liquid, publicly traded fund structure.
- Built for long-term holders: This is designed as a long-term growth engine (not just a cyclical “income play”), which matters because many 401(k) participants hold positions for years.
- Meaningful non-U.S. exposure (~50%): That global mix can help diversify outcomes if we see dollar regime shifts or U.S.-only leadership cycles change.
- Complements Target Date Fund (TDF) cores: Used alongside a TDF “core,” it can add a differentiated sleeve that’s easier to explain and defend—helping reduce litigation optics tied to crowded, “me-too” lineups.
- Strong performance relative to its peers: The team of two have managed together for almost twenty years and rank in the top 39th percentile for its one-, three-, five-, and ten-year average annualized returns versus its peers, supporting the case that management has navigated the space effectively.
Bottom line: We selected a globally diversified institutional strategy aimed at inflation protection and long-term capital growth—not just a cheaper ticker symbol. We aren't just looking for the cheapest fund; we are looking for the best value for the participant.
The "Proactive" Fiduciary Advantage
If you are a business owner, you might be wondering, "Why does this matter to me?"
It matters because of fiduciary liability. If you run a standalone 401(k) plan, you (or someone on your team) are legally responsible for monitoring these funds. If a fund underperforms for three years and you didn't document a reason for keeping it or a process for replacing it, you are opening yourself up to legal risk.
This is the beauty of the Castle Rock PEP. When you join our pooled plan, Michele Suriano and the team at Castle Rock Investment Company step into the role of the 3(38) Investment Fiduciary.
That means:
- We monitor the funds daily.
- We run the Fi360 reports quarterly.
- We make the trades to replace underperformers.
- We document the entire process.
You don't have to sign off on the fund changes. You don't have to research the DFA Large Cap International Portfolio. You just get to enjoy the peace of mind knowing that your plan is being managed by experts who are "driving the bus" while you focus on growing your company.
Why Institutional Quality Matters for Small Businesses
Historically, only the massive Fortune 500 companies had access to the tools like the Fi360 database and the "R6" or "Institutional" share classes of funds. Small businesses were often stuck with "retail" funds that had higher fees and less oversight.
We’ve changed that. By pooling multiple businesses together into one large plan, we gain the economies of scale necessary to access these top-tier funds. When we swap out a fund for a perfect "0" score, every single participant in the PEP: from the CEO to the newest intern: benefits from that upgrade.
This proactive management is what separates a low cost 401(k) from a high-value 401(k). It’s not just about what you pay; it’s about what you get for what you pay.
Is Your Current Plan on Autopilot?
If you haven't seen an investment review for your company’s 401(k) in the last six months, there is a high probability your plan is on autopilot. And in a volatile market, autopilot is a dangerous place to be.
Ask your current provider these three questions:
- What is the weighted average Fi360 score of our current lineup?
- What funds are currently on the "watch list"?
- When was the last time we replaced an underperforming fund?
If they can't give you a straight answer, it might be time for a change. Upgrading your portfolio shouldn't be a monumental task that requires dozens of hours of your time. It should be a standard part of your plan's DNA.
Ready to Level Up?
At Castle Rock PEP, we take pride in being the proactive partner that small businesses need. Whether it's navigating the latest SECURE 2.0 regulations or swapping out a fund that has lost its edge, we are here to handle the heavy lifting.
If you’re ready to see what a "Proactive Process" looks like for your business, we’d love to chat. You can start today or join us for one of our "PEP Talks" to learn more about how we’re simplifying retirement for everyone.
Simplifying retirement for all. One plan. Every business.
This content was prepared with the assistance of artificial intelligence tools and reviewed by Castle Rock Investment Company for accuracy and completeness.
