Back to Basics: Retirement Plan Sponsors Under Siege

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Given a rash of retirement plan lawsuits and evolving U.S. regulatory landscape, it's little wonder why some corporate administrators and operators of employer-sponsored pensions say they feel a bit under siege these days.  

The complexities of implementing and executing 401(k) and 403(b) plans keep expanding. Perhaps that's best illustrated by one of the retirement community's biggest trends: Plan sponsors in droves are choosing to hire investment advisors to help manage participant services in a fiduciary manner.

Nearly 70% of all 401(k) plans are using an independent investment adviser, according to the latest data from the Plan Sponsor Council of America. The report finds that such hiring activity through 2016 came separate from -- and in addition to -- use of other retirement specialists and record-keepers.

Seeking out objective and independent advice is a good start, says Shareen Balkey, director of retirement services at Index Fund Advisors. The veteran benefits plan expert, however, stresses to corporate sponsors that they need to also make sure a strong set of internal administrative controls are in-place.

"While we can help take much of the load off plan sponsors in terms of handling investment fiduciary responsibilities, IFA isn't a fiduciary of the plan itself," Balkey says.

That means, she adds, that in most cases "core" plan responsibilities just can't be delegated to outside experts.

As a result, important compliance and administrative duties that Balkey sees plans needing to address internally include:

  • Beneficiary designations.
  • Separation from service/force-out of small balances.
  • Finding missing plan participants.
  • Department of Labor (DOL) document requests.
  • Plan administration roles and responsibilities.
  • Use of forfeitures.
  • Following plan provisions.
  • Timely submission of contributions.
  • Employee education and communication needs
  • Approval process for loans and distributions
  • Monitoring outside service providers

As fiduciary specialists in this field, IFA's retirement services group has built robust resources to help plan sponsors deal with such issues. Working with more than 60 different plans, Balkey points out that the independent RIA promotes a proactive approach to keeping trustees and plan committee members up-to-date on specific compliance requirements.

"You'd think this is all very basic, but what appears as a fairly straight-forward set of rules or processes is applied very differently across different types of organizations," she says.

In some smaller companies, staffers might have trouble juggling several different hats. "We can certainly step in and help to better educate someone who might not have enough time to learn about things like how to more efficiently eliminate small plan balances and determine eligibility for new hires," Balkey says.

In those instances, IFA's retirement services group can work with a plan's record-keeper and third-party administrator to serve as a sort of "traffic cop" to help bridge communications and education among all parties. "There's this whole different language out there dealing with ERISA and DOL rules as well as plan documents -- not everyone knows it or knows how to learn it," Balkey says.

But a lack of understanding about a retirement plan's operational procedures can take place at both small and large retirement plan sponsors, she notes. In fact, Balkey was approached recently by a benefits specialist at a large company after going through an IFA onsite training session.

"Even though this benefits specialist was already highly educated about her company's 401(k) plan," Balkey recalls, "she still wanted more education about how best to oversee several specific administrative procedures."

The IFA team worked with the administrator to provide ongoing educational resources. This included directing the sponsor's benefits worker to a range of different external and internal resources to aid in her professional development.  

No matter what size of a plan is being managed, Balkey finds that plan sponsors need to establish a clear set of resources and paths for those involved in benefits administration to keep learning and advancing their craft. "Just creating a plan with no ongoing process to help communicate and educate a company's benefits workers is asking for trouble down-the-road," she says.

Fortunately, Balkey observes that IFA's retirement services group has plenty of experience in providing input into developing and maintaining such processes. "We consider education as a cornerstone of our responsibilities in serving as a retirement plan's investment fiduciary," she says.

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