Selecting a Retirement Plan Advisor – DOL Fiduciary Rule

Retirement plan advisors are vital to your business. They are there to assist in the planning and strategy of one of your company’s most important employee benefits. They should also help you navigate the complicated world of retirement investment plans. Choosing the wrong advisor can be expensive in many ways.

Among the most important duties of a retirement plan advisor is providing guidance on selecting the right plan for your employees and having a balanced investment strategy that is safe but also has a good investment return. This has not always been an easy task and, in 2016, new rules have been enacted to help.

Generally, some recommended services an advisor might offer include:

  • Acting as a fiduciary
  • Providing investment performance reports
  • Providing an Investment Policy Statement for adoption by the plan
  • Providing model portfolios so employees can diversify their accounts
  • Coordinating with other plan service providers
  • Conducting enrollment and education meetings for employees
  • Providing operational support for ongoing plan administration

In 1974 Congress enacted the Employee Retirement Income Security Act (ERISA) and empowered the Department of Labor (DOL) to protect America’s tax-deferred retirement savings.  For many years, the rules remained static and the government has since determined that many “fiduciaries” do not act in the best interests of their customers. So, after several attempts, the DOL issued new rules in April 2016, effective one year later, in April 2017. For details see “DOL Fact Sheet

The new rules indicate, among other things, that those who provide investment advice to plans, plan sponsors, fiduciaries, plan participants, beneficiaries and IRAs and IRA owners must either avoid payments that create conflicts of interest or comply with the protective terms of an exemption issued by the DOL. Among them are the “Best Interest Contract”, affecting advice and fees for services. An employer, as plan sponsor, has significant responsibilities also, as do others considered to be fiduciaries.

How much should you pay an advisor? In the past, it may have depended on the number of employees in your company and the assets that you have. So if you had a $10 million plan with 100 employees, you would pay double than if you had a $5 million plan with 100 employees. The rules above are changing this so you might want to make sure your compensation plans are transparent and use fixed fees instead of the more traditional model of uncapped, asset based fees that can have hidden costs.  At the end of the day, it comes down to the quality and value of the services you receive in exchange for advisory fees. Go through cost proposals of multiple advisors and benchmark them to determine the best one. Benchmarking can assure your costs are reasonable and also give you an understanding of what types of services other advisors may offer.

As a provider of employee benefit plan services, we may be able to help and we stand ready to discuss matter of concern to you.


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