Is your retirement plan providing adequate information to participants about the funds in the plan? What does the Department of Labor consider adequate? What services can you ask a plan advisor to provide? These are all important issues for plan sponsors—read on for expert advice on the answers.
Secure More Education for Participants
Links to spiffy dashboards and calculator apps provided by plan advisors are nice—but generally insufficient to ensure participants are well educated when making investment decisions. As 401ktv offers this guidance about choosing and leveraging the services of a good plan advisor:
While many retirement plan advisors tend to rely on automated dashboards and calculators as planning tools, these aren’t enough. Depending on their level of fiduciary responsibility, your advisor should provide timely and relevant investment management and selection advice at a minimum. When it comes to investment advice for participants, the Department of Labor is explicit that retirement plan committees and fiduciaries ensure participants have access to adequate information about the funds in the plan. The two questions fiduciaries need to answer are:
1) If participants make their own investment decisions, have you provided the plan and investment-related information participants need to make informed decisions?
2) Have you provided sufficient information for them to exercise control in making investment decisions? Clearly, this requires a higher level of service and education from your advisor, so it’s important to understand at the outset what level of advice they will – and won’t – offer participants.
Secure Protection For Yourself Too
Keep in mind that even with the services of a strong plan advisor, you still, as the plan sponsor, remain responsible for the duty of care expected of fiduciaries under ERISA law. Though you can mitigate the risks associated with this duty, you can’t fully eliminate them. That’s why it is important to protect yourself from personal exposure for a breach in your fiduciary obligations. Consider how even defending yourself from an allegation could be ruinous: the cost of securing guidance from an expert ERISA attorney averages about $600—per hour. Why not obtain Colonial Surety’s affordable fiduciary liability insurance? Then you will be covered for defense costs and penalty limits up to $1,000,000. With an annual premium that is less than one hour with an expert attorney, you will get peace of mind that your personal assets are protected from a breach of responsibility in the administration or handling of the employee retirement plan. At Colonial, it is so quick, easy and affordable to obtain coverage, you can do it right now: Fiduciary Liability for Plan Sponsors Here.
Clarify Plan Fees
Investment choices and plan fees go hand in hand, so be sure to consistently inquire about plan fees—keep asking until you understand them! Fees that are excessive are a hindrance to retirement saving for everyone—you too. They are also a clear violation of your fiduciary responsibilities–and a fast track to a costly and damaging ERISA lawsuit. Experts caution: Many 401(k) offerings have steep, hidden fees that are often embedded in investment expense ratios. In addition, some firms charge those fees but offer no planning help or advice. This results in creating confusion and potential for financial mishaps among plan participants. Your advisor should provide you a transparent breakdown of costs and compensation structures. You should also be able to clearly discern value for fees paid. This includes fund manager and recordkeeper fees.
In addition to making sure you know your plan fees, be sure to communicate about the fees—and your review process—with your plan participants.
Inquire About Cybersecurity Protocols of All Providers
With the release of guidance from the Department of Labor (DOL) this year, plan sponsors were given detailed protocols for reviewing the cybersecurity practices of all service providers. In addition to reviewing the cyber hygiene of your service providers, it is of course important to get your own cybersecurity breach response in place. You can also do this quickly, and affordably with Colonial Surety Company: Cyber Liability Protection for Plan Sponsors.
In fact, with just a few minutes you can update and upgrade protection plans for yourself, your company and the retirement plan. It’s affordable—and efficient at Colonial Surety. Our comprehensive packages provide:
- The ERISA bond required to protect the assets of the retirement plan from theft
- Fiduciary Liability coverage to protect you and your assets from personal liability; and,
- Cyber Liability coverage to safeguard your company and plan from covered losses and expenses in the event of a cyber breach.
Colonial Surety Company is in business all across the USA. We are rated “A Excellent” by A.M. Best Company and U.S. Treasury listed. Serving customers since 1930, Colonial Surety is the trusted source for the pension industry to secure legally required ERISA bonds, fiduciary liability insurance and cyber-liability insurance. We help safeguard plan sponsors, pension professionals and financial advisors – and keep their businesses compliant – with pain-free, efficient, and friendly service every time.