As many of you have heard by now, the Department of Labor has recently passed down new rulings surrounding fiduciary standards that will affect most employers and their retirement plan providers. For the most part, this ruling ensures those in charge of a retirement plan have to act solely in the interest of plan participants and their beneficiaries.
While this is no big change for us (because we’ve held ourselves to a fiduciary standard from the beginning), the new rulings may increase the risk and liability you as employers hold over the decisions you make surrounding your retirement plan. These new rulings are largely increasing the standards our industry is held to (a good thing), but it can mean some extra paperwork (and extra headaches) for those who oversee company retirement plans.
For many of you who oversee your company’s retirement plan, liability and risk are not new ideas to you. As a retirement plan fiduciary yourself, you’re tasked with ensuring your company delivers a high-quality plan at a reasonable cost. You also have a responsibility to conduct and oversee regular reviews of your plan’s features, design, services and expenses. With these new regulations, the standards for fiduciaries have increased, and along with it comes additional risk and liability.
We’ve always believed continuing education and learning are important ideals for our business, so here are some things to keep in mind in the wake of the new rulings:
- The Department of Labor strongly encourages a review at least every three years, so if you haven’t reviewed your plan recently, it’s especially important to do so now.
- Educate your committee and/or board about its fiduciary roles, responsibilities and industry best practices.
- Identify and mitigate any plan risks and liability.
- Begin to think about how your company can provide transparency into plan expenses, ensuring all services and plan features are market-competitive. Begin implementing processes and documentation to make these expenses more transparent.
- Ensure all company dollars going into your plan are being maximized through effective plan design.
- Make sure your plan’s pricing is aligned with the current market.
- Do some research into lower-cost investment options that perform as well or better than current options, which can help discover potential cost savings to your firm and/or employees.
- Document due diligence findings that are audit-friendly and suitable for the plan files.
All this adds up to a decent amount of work for most already-busy business leaders, which is why we offer our own independent Fiduciary Risk Review.
Covering All the Bases
In addition to the above steps, our Fiduciary Risk Review allows us to conduct a live industry benchmarking of your plan. We break apart plan fees to analyze each component and conduct current market pricing in a blind manner, so your plan remains anonymous. More often than not, we’re able to uncover a large chunk of savings for plans and their participants.
Further, these reviews deliver an audit-friendly packet of your benchmarking, findings and analysis. Regardless of the risk review results, this document is an important part of your due diligence files. Finally, we’re able to leverage other resources to identify, isolate and ultimately minimize the fiduciary risk and liability exposure associated with their retirement plan.
In other words, our Fiduciary Risk Review makes sure you and your employees are all well-covered and well-prepared when it comes to the road to retirement.
Fiduciary Means Doing the Right Thing
Overall, we’re happy to see fiduciary rules continue to become the norm in the retirement sector. Financial professionals who haven’t acted in their clients’ best interests have cost people a serious chunk of change, so it’s good to see our industry moving in an overall more transparent direction. Though there may be some increased work on the part of plan providers and financial advisors, we’re here to make sure everyone is up-to-date on all the latest changes and updates in our field. Never hesitate to reach out if you need help!
Marko Ungashick is co-founder and CEO of Two West Companies and is a big believer in working hard, relaxing hard, and simplifying the complex for his clients.