Michael McGowen, AIF®, Lead Advisor
“The basics that new plan sponsors need to know when setting up a plan.”
We hear the term “Fiduciary” quite commonly in this day and age. While it can mean different things to different people, it is ultimately where the buck stops in a retirement plan. While most assume that one is only a fiduciary if named in the plan document, there are three types. Let’s dig in!
Named—This is the clearest type. The person(s) is listed in the plan’s written document and can include individuals and/or specific organizational roles (think HR Director, CFO, Investment Committee, etc.).
Appointed- Still pretty clear. This person(s) is designated by the named plan fiduciary(s) while not being listed in the plan document (think Investment Manager, Third Party Administrator)
Functional- Less clear. This person(s) may not be named or appointed but is considered a fiduciary based on interaction with the plan (think as anyone making any sort of discretionary decision relating to management of the plan)
Primary Responsibilities of a Retirement Plan Fiduciary:
A Fiduciary ultimately wears many hats when it comes to fulfilling his/her obligation to the plan. These include acting in the best interest of the participants, acting with prudence regarding service provider oversight, assuring diversified plan investments, assuring plan document compliance, and assuring fee reasonableness. You might wonder, how would a company employee ever know how to execute all of this? The answer is to lean on an industry professional to quarterback the process (and relieve a lot of stress).
Primary Responsibilities of a Retirement Plan Advisor:
A good retirement advisor will use industry experience and knowledge to manage the complexities of a retirement plan on behalf of a Plan Sponsor. This includes but is not limited to taking on Fiduciary liability (referred to as a 3(21) or 3(38) relationship), evaluating and monitoring service providers, conducting group and individual participant education, benchmarking fees, and consulting on plan design. The ability to clearly communicate with all parties is paramount, especially as the industry continues evolving with technological advances, retirement legislation, and platform innovation. The ability to simplify complex retirement plan concepts is an important characteristic that all good advisors must have. This goes a long way in letting an owner run a business while knowing “just enough to be dangerous” regarding the company-sponsored retirement plan.
Closing Thoughts:
Launching a retirement plan can certainly be exciting and daunting at the same time. Many Plan Sponsors don’t even know where to start (which is completely normal). Hiring a specialist retirement advisor who has the capability to in a fiduciary capacity can go a long way in setting up a successful plan (think provider website, administration, investments). It will also pave the way for a successful retirement for both management and its employees. There are many resources on the web, but none can replace the value of a human touch.
If you would like to learn more about Retirement Plan Fiduciaries, please call our office at 240-422-8799 or email Jessica Storck at Jessica.storck@tribridgepartners.com.
