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Monday, August 2, 2021

What Can You Do As a Retirement Plan Advisor to Help Plan Sponsors?

According to Fidelity’s most recent plan sponsor attitude’s survey, we know that 92% of plan sponsors do use a plan advisor. It’s also been shown time after time, that having a financial advisor on the plan is a great benefit to sponsors and participants alike. So we’ve thought up some of the best ways that a financial advisor can help plan sponsors below.

The right kind of guidance

What retirement plan adviser can offer to plan sponsors is sharing the burden of responsibility by acting as either 3(21) or 3(28) fiduciary who will guide the plan sponsor to make a prudent selection of the funds, monitor the funds to manage the performance and risk of the plan. Also, screening and selecting right plan service providers should be done constantly to offer the best options that plan participants deserve for their hard earned money. But all of these are not mundane tasks and only professionals, with deep knowledge of the industry, should be doing it to provide best possible services and to avoid conflict of interest.

One of the biggest incentives for plan sponsors to seek a fiduciary to assist with a retirement plan is to share the burden of providing a sound advice to all participants enrolled in the plan. There are many lawsuits that target large and small plans where employers were sued for violating their fiduciary duty to prudently select and monitor the investment options included in their retirement plans. Do you know that conflicts of interest in the retirement plan industry cost Americans up to $17 billion a year?

“Trust safe harbor”

Another effective methods each retirement plan advisor should put forward to plan sponsors is to adopt an ERISA “Trust safe harbor”. Trust safe harbors (unlike the commonly referred to “safe harbor plan” which helps the plan pass administrative testing requirements) are commonly applied to mitigate or reduce the potential liability plan sponsors face as Trustees of their plan as they manage plan investments.

Each retirement plan advisor has to make the plan sponsor clearly aware that as an employer or high-ranking company manager, it is in their interests to understand safe harbor options as the company’s corporate retirement plan grows. The reason is, as your plan grows, so too does the liability for ensuring that the plan is managed in a reasonable and accountable fashion.

Among the commonly used “Trust safe harbor” options are: 3(38) Fiduciary Investment Manager Option (where RIA becomes a delegated “prudent expert”, a plan fiduciary with total responsibility for selection and monitoring of plan investment options), 404(c) Participant-Directed Safe Harbor (for self-directed 401(k) plans, where 404(c) absolves the plan sponsor of all participant investment decisions) and 404(c)5 Qualified Default Investment Alternative (QDIA) Safe Harbor (where QDIA protects employers from liability if contributions are made to the plan absent investment direction from an employee).

But wait, there’s more…

An advisor can help a sponsor to make their plan offer the best features and benefits relevant to their participants available. For example, many plans may be missing simple, but, very important features like QDIA and Automatic Enrollment. A financial advisor can help guide a plan sponsor through the setup of their plan to make sure that it is effective and offers features that will help employees save for their retirement and maintain the plan’s financial health.

Financial advisors can also help plan sponsors to ensure that their investment options are good performing and cost effective for the plan. The guidance of an advisor is critical to ensure that the plan sponsor can offer their employees good quality, fairly priced mutual funds to save for retirement.

On top of fund selection, financial advisors are critical in educating the employees of the plan itself on how to properly save for retirement and choose the correct investment portfolio for their circumstances. Plan participants and sponsors that work with an advisor consistently agree that they feel better prepared for retirement than those that do not have an advisor.

Whether it’s providing fiduciary relationship to the plan sponsor, helping with fund selection, or just helping to educate the members of the plan: it’s clear that financial advisors have plenty of avenues available to them to be of great help to plan sponsors across the country. Knowing all this information, it’s no wonder that more and more plan sponsors are starting to take advantage of a plan advisor for their retirement plans.


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