This tip is taken from Michael Webb’s article “The Top Five Things You Need to Know About ERISA 404(c),” which originally was published on Nov. 21, 2014.
The differences between the Non-ERISA and ERISA 403(b) worlds are also found in the expectations and structure related to the servicing of these plans. More often than not, ERISA 403(b)’s may have a single vendor, or at most two or three. And, there is typically little uniformity in the quality or quantity of services delivered to the sponsor and participants by multiple plan vendors. Many client organizations want to work with the largest institutional providers, but come to find them lacking the individual service attention that is more commonly found in the K-12 market. Combined with a regulatory focus on fiduciary issues over the last six years, this has created lots of opportunity for advisors willing to put forth the time and effort.
Organizations, whose retirement plans are covered by ERISA, tend to be run more like for-profit organizations than K-12’s. Under ERISA, the sponsor is held accountable for a great deal more than in Non-ERISA plans, and therefore their expectation for service is different, particularly as the primary client is the plan sponsor. Unlike K-12’s, non-profit organizations do not always subscribe to a continuous series of individual meetings with plan participants in the workplace, as a desired service model. More often, that model can be disruptive and inconsistent, even with the advisor’s best intentions. A more effective model will help the sponsor deliver effective communications, and the education needed to help the participant understand their choices, and exercise direction of their accounts. Unfortunately, many of these plan sponsors have never had effective on-site service of this nature, or it hasn’t been delivered consistently.
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