Editor’s Note: ERISA Tips is a feature provided with you in mind — to make the newsletter more useful to you! If you have any content for ERISA Tips or the 403(b) Advisor that you would like to contribute or suggest, please contact John Iekel, editor of the 403(b) Advisor, at [email protected].
The following information is derived from “17 403(b) Best Practice Tips,” by Jim Phillips, president of Retirement Resources in Peabody, Mass. He argues that being aware of fiduciary duty best practices and helping plan clients to implement them, a professional can gain an edge. And that applies to both ERISA 403(b)s and non-ERISA 403(b)s. This installment focuses on steps that can be followed to take inventory of a plan.
It may be some time since anyone went back and performed a thorough review of the plan, its providers, and its features, Phillips says. He argues that a fresh look may provide reassurance or it may identify areas that need proactive attention.
List all of the plan’s service providers and determine who’s doing what and how much they’re paid. Plan fiduciaries are supposed to know this already, but many need help understanding the sometimes complicated economics beneath the surface, including revenue sharing from fund companies and net crediting rates on stable value type products. The 408(b)(2) disclosures should be understood by employers and you can help..
Help the committee to determine the reasonableness of the compensation described above. It’s a prohibited transaction to pay more than a reasonable amount. Some form of benchmarking is needed to assess reasonableness, and there are many options that can be employed depending on circumstances. These could include some form of proposal process or a third-party benchmarking report.
Review the plan’s design. Do its features best match the plan’s current needs? If it hasn’t been amended or changed to take advantage of Roth, qualified default investment alternatives, or one of the auto options, should it be? If the demographics of the population have changed, should any design changes be made to reflect that?
Determine if the plan provider’s platform offers useful features that the plan is not using. Does the investment architecture provide access to a wide universe of options from different providers? Do they now provide outsourcing services the plan should be using, such as beneficiary tracking, and loan and distribution approvals?
Study the demographics of the employee population. Fiduciaries must consider demographics. Are the education, communication, and investment offerings consistent with the plan’s age and sophistication profiles?
Analyze how the plan’s assets are invested. Are the asset allocations suitable considering your plan demographics? Do participants have age and/or risk-appropriate individual allocations? If not, formulate a plan to improve them, possibly involving education and accessibility tools.
Examine the state of retirement readiness of the plan’s participants. If a particular age group or other demographic has an unusually large gap, formulate a plan to improve that condition.
The following information is derived from “17 403(b) Best Practice Tips,” by Jim Phillips, president of Retirement Resources in Peabody, Mass. He argues that being aware of fiduciary duty best practices and helping plan clients to implement them, a professional can gain an edge. And that applies to both ERISA 403(b)s and non-ERISA 403(b)s. This installment focuses on steps that can be followed to take inventory of a plan.
It may be some time since anyone went back and performed a thorough review of the plan, its providers, and its features, Phillips says. He argues that a fresh look may provide reassurance or it may identify areas that need proactive attention.
List all of the plan’s service providers and determine who’s doing what and how much they’re paid. Plan fiduciaries are supposed to know this already, but many need help understanding the sometimes complicated economics beneath the surface, including revenue sharing from fund companies and net crediting rates on stable value type products. The 408(b)(2) disclosures should be understood by employers and you can help..
Help the committee to determine the reasonableness of the compensation described above. It’s a prohibited transaction to pay more than a reasonable amount. Some form of benchmarking is needed to assess reasonableness, and there are many options that can be employed depending on circumstances. These could include some form of proposal process or a third-party benchmarking report.
Review the plan’s design. Do its features best match the plan’s current needs? If it hasn’t been amended or changed to take advantage of Roth, qualified default investment alternatives, or one of the auto options, should it be? If the demographics of the population have changed, should any design changes be made to reflect that?
Determine if the plan provider’s platform offers useful features that the plan is not using. Does the investment architecture provide access to a wide universe of options from different providers? Do they now provide outsourcing services the plan should be using, such as beneficiary tracking, and loan and distribution approvals?
Study the demographics of the employee population. Fiduciaries must consider demographics. Are the education, communication, and investment offerings consistent with the plan’s age and sophistication profiles?
Analyze how the plan’s assets are invested. Are the asset allocations suitable considering your plan demographics? Do participants have age and/or risk-appropriate individual allocations? If not, formulate a plan to improve them, possibly involving education and accessibility tools.
Examine the state of retirement readiness of the plan’s participants. If a particular age group or other demographic has an unusually large gap, formulate a plan to improve that condition.
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