401(k) Plan Sponsors: 5 Reasons to Outsource Your Plan Sponsorship & Fiduciary Obligations
Our Fiduciary File Checklist and Expertise in Plan Sponsorship Can Save You Time and Money
As an employer, offering a 401(k) plan to your employees can be incredibly rewarding. However, it is also a challenging undertaking – one that requires much of you, including meeting your fiduciary obligations to plan participants each year. The basic rules outlined by the Employee Retirement Income Security Act (ERISA) offer a standard of conduct that must be followed in administering a plan and managing its assets. Since the required actions and responsibilities are manifold, many small and medium-sized business owners outsource their plan sponsorship through a third-party service provider.
At Paces Ferry Wealth Advisors, we understand your regulatory responsibilities as a 401(k)-plan sponsor and the need for proper documentation – and we know it can be a bit overwhelming. We believe that having a solid knowledge- base of plan governance, plan design, investments, participant investment behaviors, and recordkeeper services is unique, and we are proud to offer our knowledge and experience to our clients wishing to outsource their plan sponsorship. With the growing number of court cases and settlements related to the mismanagement of retirement programs, the stakes are increasing for sponsors to fully appreciate their plans’ risks and take necessary steps to meet their fiduciary obligations.
To assist plan sponsors in meeting their responsibilities, we have created a complimentary Fiduciary File Checklist that covers:
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Plan Administration and Reporting
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Investment Due Diligence
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Service Provider Agreements
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Fiduciary Duties
In addition to the Fiduciary File Checklist, we also offer 401(k) plan sponsorship outsourcing that provides small and medium-sized business owners like you with a cost-effective way to save time and money, while avoiding potential IRS penalties by ensuring your plan is administered correctly and your fiduciary obligations are met.
Why Outsource Your 401(k) Fiduciary Obligations?
In a nutshell, outsourcing your 401(k) plan sponsor obligations means gaining valuable expertise in the areas of:
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Choosing proper investment options
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Understanding distribution regulations
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Filing proper government reports
If you haven’t worked in financial services, you may not realize just how extensive the duties of a plan sponsor can be – or how easily serious missteps can be made. Hiring experts can insulate you from things like government agency review and lawsuits. Additionally, your numerous plan sponsor responsibilities, as listed on this Fiduciary File Checklist, require much of your valuable time, which may keep you from focusing on growing your business.
For these reasons, ERISA explicitly allows for third-party assistance in Rule 404a1B, also known as the Prudent Expert Act. It allows plan sponsors to hire “prudent experts” to assist in maintaining their fiduciary duties to 401(k) plan participants.
At Paces Ferry Wealth Advisors, our holistic approach to retirement plan consulting, management, and administration provides plan sponsors with a comprehensive understanding of all facets of their plan and the regulatory effects of their recommendations and decisions. Your plan participants are relying on you to meet your fiduciary obligations and outsourcing your plan sponsorship means you can rely on us to ensure you fulfill all requirements. Specifically, we pride ourselves on benefitting our clients with expertise in five important areas:
#1: Plan Governance
When you partner with Paces Ferry, our involvement with plan governance provides a significant value-add, as we draw on our extensive knowledge of industry best practices, guidance from the Department of Labor (DOL), ERISA counsel, and case law to provide foundational documentation and fiduciary training to each of your retirement plan committee members. Case law has made it clear that following a clearly defined process will better position your organization when your decisions are called into question. Additionally, good governance generally leads to better outcomes for participants and beneficiaries and positive outcomes for plan sponsors and fiduciaries in the form of lower risk. For a fiduciary, good governance practices may stand between personal liability and no liability at all.
#2: Plan Design
While it is important to monitor plan design from a compliance and competitiveness perspective, Paces Ferry believes it is equally important to assess your plan design relative to the return on investment received by the plan sponsor. Plan sponsors should expect to receive value that exceeds their plan costs. Thoughtful plan design can have a significant impact on the hiring and retention of key employees, as well as improving employees’ retirement readiness. Furthermore, efficient plan design focused on maximizing long-term outcomes can lower employment costs, as both engaged and disengaged employees can be better positioned to afford retirement.
#3: Comprehensive Education
Our Employee Education Program leverages our industry knowledge with client plan demographics to discover the best means to educate and advise our clients’ employees. We are committed to delivering tailored participant education solutions with thoughtful strategic planning, valuable professional services and technology-based solutions that result in sustained client and employee satisfaction.
#4: Provider Consultation
Paces Ferry’s approach to recordkeeper consultation relates to knowing the core services available and the appropriate fees that you and your plan participants should be paying for the services you are actually receiving. We have often discovered that plan sponsors are not fully aware of their recordkeeper’s services and they benefit from an increased awareness of the full breadth of services available. An additional area of our work involves applying the appropriate degree of leverage necessary when service issues develop, or service professionals are not meeting expectations.
#5: Investment Oversight
A solid foundation provides the framework for a successful retirement program. Paces Ferry’s approach is driven by the establishment of appropriate policies and procedures to drive investment and plan decision-making; we view it as critical that our clients establish and follow sound practices that are supported by proper documentation. We would sum up our investment philosophy as follows: Our mission is to deliver comprehensive investment advisory services that help plan sponsors meet and exceed their fiduciary responsibilities by providing them with the proper risk management solutions and independent advice they need.
Final Thoughts for Outsourcing 401(k) Plan Sponsorship
Allowing an experienced, knowledgeable third-party, such as Paces Ferry Wealth, to manage your 401(k) plan gives you the peace of mind that comes with knowing things will be done properly and that you will successfully meet all your fiduciary obligations. It’s an opportunity for you to gain back valuable time to focus on your business by handing off the tedious work that 401(k) plan sponsorship requires and leveraging expertise while still keeping your costs under control.
We hope you will download our Fiduciary File Checklist and utilize it as a valuable resource in meeting your 401(k) plan sponsorship obligations. If you’d like to learn more about outsourcing your plan sponsorship with Paces Ferry Wealth, visit our website to find additional information or to schedule a call.