Five Ways Fiduciary Consultants Help Guide Your Retirement Plan

If you’re like many employers, you may not fully understand the fiduciary responsibilities associated with sponsoring a 401(k) or defined contribution plan for your employees. In today’s employment landscape, including these types of plans as part of your employees’ benefits package is only one part of a bigger puzzle. Ensuring that each plan operates at peak efficiency and complies with all fiduciary requirements is also essential. 

Think of your plan as a human body. While it may function well most of the time, regular doctor visits for preventative care are still highly recommended, as these visits can sometimes detect underlying issues that may not be evident on the surface.

Plan fiduciaries have many responsibilities beyond overseeing plan performance 

A fiduciary is someone who assumes legal responsibility for someone else's money. As such, they are legally required to manage that money in the exclusive best interests of its owner and beneficiaries. Moreover, every retirement plan sponsor has some level of fiduciary responsibility. Plan fiduciary best practices include the establishment of and adherence to prudent oversight processes; demonstration that plan level expenses are reasonable and customary for services received; and documentation that decision-making is performed in the exclusive best interest of plan participants and beneficiaries. 

Overseeing investment portfolios and performance is only one part of a plan fiduciary’s responsibilities. Even if participants have benefited from consistently strong investment performance, there still could be room for improvement in other aspects of the plan, particularly when it comes to fulfilling the many fiduciary responsibilities required of plan sponsors. 

Five Ways Fiduciary Consultants Can Guide Your Plan in the Right Direction 

Like a good doctor providing effective preventative care, fiduciary consultants offer numerous services that can improve the overall health of the plan and even save the plan sponsor some money in the long run. These services include:

1. Ensuring ERISA and regulatory compliance: Ensuring the plan complies with 
   ERISA regulations for all investment and non-investment related responsibilities—through the implementation and documentation of prudent processes—are key areas where fiduciary consultants can be an invaluable asset. 
2. Improving investment structure and mitigating risk through prudent oversight:  As part of a routine retirement plan check-up, fiduciary consultants can offer guidance on investment selection and monitoring and establish prudent processes to mitigate the risks associated with those practices, while providing fiduciary oversight and ensuring the plan serves the best interests of participants.
3. Benchmarking fees and reducing unnecessary costs: Plan sponsors need to periodically benchmark fees against industry standards to ensure compliance with ERISA guidelines. Benchmarking is a due diligence process that can save the plan money by reducing excessive recordkeeping and administrative fees, while also ensuring the plan sponsor demonstrates that fees are reasonable and customary for services received.  This process can identify areas of improvement and help optimize plan performance. 
4. Limiting fiduciary liability: Under ERISA Section 404(c), if a plan meets certain requirements, the plan's fiduciaries are generally not liable for losses that result from the investment decisions made by participants. Fiduciary consultants can review your plan, make sure it meets the requirements for those protections, and document that the requirements have been met. 
5. Satisfying the ERISA “Prudent Expert” requirement: Fiduciaries who fail to meet their obligations under the “prudent expert” rule may be subject to disciplinary action (and personal liability) by regulatory authorities.  The term “prudent expert” refers to the standard of care required of the fiduciaries of a defined contribution retirement plan. The rule states that fiduciaries are obligated to manage the plan assets with “care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, based on the investment objectives, risk tolerance, financial circumstances, and needs of the retirement investor.”  Plan sponsors unable to satisfy these requirements have a fiduciary obligation to retain that expertise on behalf of the plan.  Fiduciary consultants can help ensure that your plan is fulfilling this requirement.

Key Takeaways 

• Every retirement plan sponsor is a fiduciary and must adhere to certain standards, while acting in the exclusive best interest of participants and beneficiaries while performing their duties with skill and care of a “prudent expert”.
• Plan fiduciaries must satisfy several regulatory requirements, and any breach of those obligations could result in disciplinary action and personal liability.
• Like a doctor whose medical obligations extend well beyond just treating patients when they’re not feeling well, fiduciary responsibilities include much more than merely monitoring investment performance. That’s why it is recommended that the plan has periodic routine check-ups conducted by experts who can point out potential problems before they develop into major issues. 

How Newport can help plan sponsors fulfill their fiduciary obligations 

Newport, an Ascensus company, is a leading provider of investment and fiduciary consulting services.

We are an independent firm with no affiliations with any investment management or mutual fund companies. Our services help support plans working with or without a financial advisor. As such, we provide unbiased recommendations without any potential conflicts of interest. 

Our fiduciary services are designed to help plan sponsors comply with their fiduciary obligations. Our consulting practice offer support for day-to-day plan management from a team of investment and fiduciary governance professionals, and we provide fiduciary services designed to meet your specific needs, including:

• Annual benchmarking of plan fees
• Simplified plan administration and investment responsibilities
• Fund diversification to ensure employees have appropriate investment options
• Limiting fiduciary responsibilities and liabilities for the plan sponsor
• Minimizing administrative tasks associated with the plan
• Partnering with plan sponsors and fiduciaries to keep the plan in compliance with ERISA

Contact Newport’s Investment and Fiduciary Consulting Services Practice to learn how we can help you manage your retirement plan and associated fiduciary responsibilities.