As an employer, it’s your responsibility to ensure safe and stable management of your employees’ retirement plans. Doing this involves research and keeping yourself up to date both legally and practically on the investments and operations of the plan.
Hiring an independent 3(38) Investment Fiduciary for your retirement plan can significantly reduce your workload. They oversee day-to-day operations, and provide you with added protection and peace of mind as they are responsible for selecting, managing, and monitoring your plan’s investments.
If you are looking for turnkey solution to help manage your company retirement plans, the following tips are some of the fundamental things to look for in a third-party fiduciary.
The Difference Between A Record-Keeper, Third Party Administrator And Investment Fiduciary
To be clear, many employers mistakenly misinterpret the roles of a record-keeper, Third Party Administrator (TPA) and an investment fiduciary. A record-keeper (i.e. Fidelity, Empower, Principal) allows the employer and employee to see the accounts online.They have nothing to do with investments. The TPA verifies the accounts and makes sure the plan meets Department of Labor requirements. The Investment Fiduciary takes on the responsibility for the investments in the plan. The good ones will provide additional services like managed money, personal employee advice and other bells and whistles.
Not all retirement plan providers offer the same menu of services and as a result, they might not fit your particular needs or worse unintentionally put your responsibility in harm’s way. Part of your upfront work will be to clearly define your goals for your retirement plan. You should shop around to see which ones can deliver what you need for your staffing and budget situation.
Once you narrow down your options, review the investment fiduciaries' costs and services to see if any company needs are missing or should be tailored into your plan documents. Make sure they can deliver a plan that aligns with the needs, demographics and culture of your organization. It’s also important to clarify the responsibilities of both the employer and the investment manager.
Fee Structures for Different Services
Just as different plans offer different types of services, exclusions, contribution structures, and customization options, they can also come with different fees. Ask potential firms to clearly outline what services are included in their fees and what may be additional costs. Make sure there are no hidden fees. The Department of Labor states that fees should be reasonable given the level of service, not cheap. Sometimes more expensive services might actually save money and time.
Overall documentation for your investment fiduciary is an excellent if not foolproof measurement of their quality. It is called an Investment Policy Statement (IPS). If the company you’re thinking of choosing has a proven process along with a successful track record for its client’s retirement plans, that’s a good sign. Some questions to ask regarding performance include:
- Is the investment process inside the IPS?
- What is the investment process?
- Do you have any compensation from the funds? (If an advisor receives money from the mutual funds, then they represent their own best interest and not your company’s best interest.)
- How do you track success for your clients?
Ask about the firm’s background and request references that can speak to their process.
Data Security Questions
Yes, data security is a fundamentally important part of today’s financial world and it will only become more crucial as an increasing proportion of investment and banking finance becomes purely digital.
The investment fiduciary that you select should have a highly rated and breach-free data security history. You should in fact be able to request and easily receive detailed information about what sorts of steps your retirement plan advisor uses to handle IT security. Knowing about their policies for preventing breaches, preventing ransomware attacks and sharing access with plan contributors is becoming very important in today’s world.
Communication and Engagement with Employees and Employer
Regular communications with you, the employer, as well as with employees in your retirement plan is vital. Ask how often and what methods they send information. Are they readily available by phone to talk to you? Are regular communications sent to both you and plan participants? Do they provide adequate rationale and documentation for changes in investment decisions, for example. Are there easy-to-use tools and opportunities for investment education for employees?
Seek Outside Assistance
If you want to simplify your company retirement plan process for minimal headaches in setting up and administering your employee 401(K)s, get expert assistance with GGA Retirement. We are an experienced 3(38) investment fiduciary with a nearly 20 year record of providing excellence.
With our noted personal investment education site for exclusive use by your employees, we help improve employee participation in company retirement plans. Let us help you with your 401(K) plan to reduce your burdens and keep your staff contributions safe and healthy for the long-term.