
For small to mid sized employers to remain competitive for talented employees and retain thise employees they must improve the quality of the qualified retirement plan their offer. This can be done by outsourcing this responsibility to experts in the field.
In evaluating service providers, plan fiduciaries should not limit their analysis to cost. Instead, fiduciaries must take into account other factors that are relevant to making a prudent decision, such as conflicts of interest, the results being produced by the service provider, references, and the needs of the plan and its participants. The preamble to the proposed regulation explains: “A responsible plan fiduciary should not consider any one factor, including the fees or compensation to be paid to the service provider, to the exclusion of other factors. Further, a fiduciary need not necessarily select the lowest-cost service provider, so long as the compensation or fees paid to the service provider are determined to be reasonable in light of the particular facts and circumstances.”
It may seem difficult to evaluate criteria such as conflicts of interest. However, much of that responsibility can be handled by understanding and evaluating all of the compensation being received by the service provider from all sources. For example, if the service provider receives more compensation from some investments than others, has the prospect of additional compensation influenced the service provider’s recommendation—possibly to the detriment of the participants?
The end result of these regulations will be a more prudent retirement plan for the company and it’s employees. Plan sponsors have the burden of providing their employees with a retirement savings vehicle or the government will.
Please comment or call to discuss how this will affect you and your company.
Related articles
- A Closer Look at Fiduciary Status Under ERISA (401kplanadvisors.com)
- What ‘Fee Disclosure’ Rules Really Mean for Plan Sponsors (401kplanadvisors.com)
- Who Are Your Fiduciaries? (401kplanadvisors.com)