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Call to Action for Retirement Plan Fiduciaries

RETIREMENT PLAN SPONSORS and plan fiduciaries are encouraged to be proactive in response to the DOL’s 408(b)2 regulation. Although the effective date is July 1, 2012, plan fiduciaries should begin now to implement a best-practice, prudent process to manage their responsibilities resulting from the DOL regulation. Again, even though actual disclosure of fees is the responsibility of plan service providers, the ultimate oversight and well being of the plan falls to the plan’s designated fiduciaries.


There are several action steps that plan fiduciaries may want to consider as they implement a prudent process for the DOL 408(b)2 regulation:



 1. Identify all plan service providers: A listing of service providers for the plan should be compiled and each provider contacted in writing to determine the level of knowledge and responsiveness to the 408(b)2 regulation.


2. Initiate a plan benchmarking analysis: It is not too early to begin a thorough analysis of the current status of your plan. Fiduciary best practices generally suggest a comprehensive plan review every three to four years, either by means of a formal RFP (request for proposal) process or a benchmarking analysis. However, with implementation of the 408(b)2 regulation, it is imperative for plan fiduciaries to be proactive in determining if current service provider fees are reasonable. Quality third-party benchmarking services are available to help identify appropriate industry peer groups, comparable plan asset sizes and comparable number of plan participants to conduct an objective review of current plan service providers.


3. Eliminate revenue sharing between plan service providers: While revenue sharing is not prohibited, many plan fiduciaries are opting for full-transparency by requiring all service providers to agree, in writing, not to receive indirect fees or any other compensation from other plan service providers or third-parties.


4. Engage professional third-party plan fiduciaries: As the complexity of managing retirement plans increases, many plan fiduciaries are turning to professionally trained fiduciary experts to help them mitigate their risk exposure and enhance their plan participants’ retirement outcomes.

These fiduciary designations include:


ERISA 3(21) fiduciary plan advisor:An ERISA 3(21) fiduciary plan advisor will state – in a written agreement – that they are acting as a fiduciary to the plan for services performed (as stated in the agreement). A qualified 3(21) plan advisor can be an invaluable resource to help plan fiduciaries manage their responsibilities in an increasingly complex regulatory and legal environment. Today, there is no reason retirement plan sponsors should settle for anything less than advisors and consultantsthat accept full fiduciary responsibility for theiradvice and actions.

ERISA 3(38) investment manager: As was stated earlier, most court cases involving retirement plans revolves around the investment choices plan fiduciaries made and the fees and expenses related to the funds chosen. An excellent way for plan fiduciaries to mitigate the risk of plan investment selection is to outsource all investment decisions by engaging a professional ERISA 3(38) investment manager to assume the responsibility to select and monitor the plan’s fund lineup. The 3(38) investment manager assumes full discretion of the funds selected, as well as ongoing review of the funds in the plan and, if necessary, responsibility for changes to the fund lineup.  Since many plan participants are in need of professional help in developing an effective asset allocation strategy to meet their investment goals, the 3(38) manager can provide professionally managed portfolios based on varying age and risk factors. Additionally, some 3(38) investment managers have access to low-cost, institutional funds that help enhance participant retirement outcomes by reducing investment costs.


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Comment   |  8 years ago from Lititz, PA