Key Questions for Your Retirement Plan Provider, Including the F-Word

Retirement plan providers all talk a good game. Plan sponsors need to ask smart questions to identify the best candidates. To help you, Smart Investor will present a series of posts listing key questions for your potential providers. Today’s post focuses on questions about services such as investment advice, education, participant communications, recordkeeping, and custody.

To fulfill your responsibilities under ERISA, the Employee Retirement Income Security Act governing retirement plans, you must understand in detail the specific services your vendors offer. So, ask the candidates, “What specific services do you provide and who will provide them?”

Walk away if your potential provider won’t answer your questions in detail. The Department of Labor requires them to provide this information in writing before you engage them.

Use the F-Word for the Best Retirement Plan

The following question is critical: “Are you a fiduciary and do you accept fiduciary responsibility in writing?” A fiduciary advisor upholds the highest standards, acting in the best interests of plan participants and beneficiaries.

Not every provider is a fiduciary. Many are not as we discussed in “The Secret Your 401(k) Vendors Don’t Want You to Learn: ‘Co-Fiduciary’ Doesn’t Mean Much.”

Hiring a fiduciary, especially a registered investment advisor who acknowledges status as an investment manager under ERISA Section 3(38) is best. This lets you delegate your fiduciary responsibility and liability to the advisor. Delegation is becoming more important as lawsuits for breach of fiduciary duty become more common.

Get the details on investment providers, recordkeepers, custodians, TPAs

Most providers work as a team with others, such as recordkeepers, custodians, and third-party administrators. Don’t assume those others also act as fiduciaries. Ask for the names of the companies, the services they’ll provide, and whether they will act as fiduciaries.

The list of services should also address whether the companies offer the following:

  1. Personalized one-on-one enrollment and fiduciary investment advice services for each of your participants
  2. Model investment portfolios, including a summary of their fund allocations, investment performance, expected rate of return and risk level
  3. On-line and 24/7 voice response system that allows participants to view and make changes to their accounts
  4. Participant communications and advice to help employees get the most out of the retirement plan
  5. Agendas and meeting minutes for your plan sponsor/trustee meetings with documentation demonstrating that you, the plan sponsor, is meeting your plan responsibilities

In future blog posts, Smart Investor will cover more important questions that plan sponsors must ask.

Looking for a registered investment advisor serving Sacramento, Roseville, and Stockton, CA? Smart Investor serves all three cities from our base in Rocklin, CA. Contact us at 916-435-2100.