When you sponsor a plan you or someone you select is required to function as a fiduciary.
The IRS definition: “A fiduciary is a person who owes a duty of care and trust to another and must act primarily for the benefit of the other in a particular activity. For retirement plans, the law defines the actions that result in fiduciary duties and the extent of those duties.”
Since enactment, in an effort to help a plan fiduciary perform their duties, a number of laws, regulations and codes have been published to outline what is required to satisfy the fiduciary criteria. There is often potential liability when these responsibilities are not performed on time or in compliance with the IRS and DOL guidance. Since you must carry out these functions in the same manner as a prudent person, it is often in your best interest to consult experts in the field.
Experts can sign agreements with the plan to take on certain pieces of your fiduciary responsibilities. Therefore alleviating you, the plan sponsor, from performing all required items. As is common with regulations such as this, the different ways in which a service provider can act on your behalf have been given special names that correlate with the ERISA code.
Investment Manager is a codified investment fiduciary on a retirement plan as defined by ERISA section 3(38). The name of this particular fiduciary makes it easy to guess its role. The 3(38) is responsible for selecting, managing, monitoring, and benchmarking the investment offerings of the plan.
3(21) defines a fiduciary as an individual who exercises any discretionary authority or control regarding the management of the 401(k) plan. It also refers to an individual who renders investment advice to the plan in exchange for compensation.
A 3(38) can select, monitor, and replace investments for the plan. While a 3(21)-investment fiduciary only advises such items and must wait for approval from the plan sponsor on such decisions. This is why a 3(38) fiduciary must be a registered investment adviser (RIA) under federal or state law, a bank, or an insurance company.
Find more about what the IRS expects of a plan fiduciary here: https://www.irs.gov/retirement-plans/retirement-plan-fiduciary-responsibilities
Send the message that your employees are essential to your mission by showing you are willing to invest in their future. Just having a retirement plan option is often not enough. Employees deserve excellent investment advice and top-notch financial education.
Did you know?
When RPC takes over as the advisor of your plan we bring with us best in class financial wellness tools, education programs, and materials such as:
Anyone can build an investment lineup if properly educated. This includes your plan’s fund lineup. RPC has many tools at our disposal to help the plan stay ahead of the curve. Tools range from proprietary reports and analysis projections to trailing return analysis and metrics. In addition to all these resources, RPC runs investment benchmarking reports Quarterly to evaluate and score every investment option offered by a plan on a 12-point quantitative and qualitative scale. This helps you as a plan sponsor understand the ins and outs of the investment lineup offerings.
Many employers worry about the administrative hassle that often arises with offering a 401(k). When you start a plan at RPC, we ensure that your service providers take on as much of the workload as possible. Who are the other service providers besides the advisor?
The Record Keepers' primary responsibility is to hold, track, and exchange all the different “Money Types” in participants accounts.
A participant’s account can be made up of several distinct types of money. Some examples include ROTH, after tax, Traditional (pre-tax), employer contributions, Profit Sharing, Roll Overs, dividends, and distributions from investments. All these Money Types need to be tracked separately.
The Record Keeper also facilitates payroll contributions to be allocated to participants elected investment options. In some cases, the Record Keeper is also the one who manages the mutual funds participants invest in.
When RPC takes on the role as your plan’s financial advisor, we will also take on the role of a service provider liaison. In the case of a Record Keeper this means that we are able to use our experience to negotiate better services and pricing for your plan. We will also provide benchmarking reports to you, the plan sponsor, regularly so that you feel comfortable that you are making informed decisions.
RPC works with many Record Keepers throughout the country and is flexible in its ability to adapt to any system.
A good Third-Party Administrator is essential to a well running plan. It is the TPA’s primary responsibility to alleviate the administrative burden of your team. Often times, the Record Keeper can also serve as your plans administrator. You can also have these roles separated in order to find the very best providers. There are thousands of pages of legislation and rules that plan sponsors must follow in order to operate their plans compliantly. The TPA, sometimes known as a Compliance Administrator, helps ensure that the plan is functioning in accordance to all legislation and that plan sponsors receive the assistance they need to operate a plan in any special circumstances.
Some of the functions they perform include approving transactions, sending required notices, preparing and signing various tax filings including the 5500 and more.
In many cases the TPA can sign an agreement to function as a 3(16) fiduciary and thereby take the responsibility on your behalf. If the plan is not operated in compliance with IRS and DOL guidelines they are on the hook. When RPC brings in a TPA, we often strongly encourage the use of 3(16) fiduciary services.
ERISA law requires you (the plan sponsor) to ensure that the fee’s your participants pay are “reasonable” What does this look like, and how often should you be making sure the fee’s in your plan are reasonable?
How: The Department of Labor (DOL) has suggested “establishing an objective process to aid in your decision making.” When Retirement Plan Consultants serves as your plans advisor, we regularly benchmark your plan to meet these standards. If for whatever reason a benchmarking report does not come back favorable, we will negotiate with current providers or initiate RFP’s on your behalf to try and find better options for you and your team members.
When: Many fiduciary services suggest that you do this at least once every three years. When you sponsor a plan with Retirement Plan Consultants, we run this service quarterly.