ERISA Attorneys, Jason Roberts, CEO of Pension Resource Institute and Marcia Wagner of Wagner Law both highlight the fiduciary risk reducing effects of helping employees become retirement ready. Are you aware that if you function as fiduciary, you are a fiduciary? Further, you are personally at risk in addition to the company?
Attorney Wagner expresses “The U.S. Department of Labor’s “404a-5 Regulations” (participant fee disclosure) impose an implied duty on plan sponsors to promote the financial literacy of the plan’s average participant, educate participants on how they may save and invest through their plan.”1
What’s in it for you? “Plan sponsors who improve the retirement readiness of their plan participants can avoid unnecessary risk, potential liability and can enjoy significant economic benefits from enhanced workplace productivity.”
Steps to Helping employees become Retirement Ready
She gives the following best practices to promote retirement readiness:
1. Evaluate Retirement Readiness at Plan-Level.
2. Implement Retirement Readiness Communication and Education Program.
3. Integrate Readiness Assessment into Education Program.
4. Adopting Plan Design Changes to Promote Retirement Readiness.
Fiduciary due diligence and retirement ready
Attorney Roberts developed a fiduciary due diligence evaluation tool called “The Resource Optimizer”. The first ten questions provide a framework for you to determine the level of mandatory process-focused support necessary to manage various compliance requirements. You can choose to do these things yourself or seek an outside provider. Keep in mind that not all providers act in a fiduciary or in your best interests’ capacity. The next five questions are designed to determine the desired level of commitment to maximizing employee engagement and participant outcomes, retirement ready. While these activities are optional, they help to ensure you are acting in the best interest of his/her employees.
The answers to these questions form 4 quadrants to assess the state your fiduciary due diligence. The quadrants are:
- No process
- Do it yourself
- Process Focused
- Outcome Focused
I will let you guess which quadrant is the least desirable. Email us if you would like a copy of the “Resource Optimizer” fiduciary due diligence tool.
Fiduciary Outsourcing and Participant Outcome Focus
Outsourcing your fiduciary responsibility to those that either share in or take on your fiduciary responsibility is what I promote. The Employee Retirement Income Security Act actually promotes hiring fiduciary providers. W. Scott Simon writes, author of “The Prudent Investor Act” and Morningstar columnist, writes extensively on the topic of fiduciary outsourcing. In the age of specialization are you using a non-specialist advisor? A Retirement Advisor Council study1 of 400 retirement plan sponsors across the country shows that financial professionals can have a big impact on plan success.
• Higher deferral rates
• More effective plan design
• Greater use of compliance-savvy procedures
• Comprehensive investment arrays
How do you know if your advisor is retirement focused? Retirement focused advisors have designations such as Accredited Investment Fiduciary®, Qualified Plan Financial Consultant and Professional Plan Consultant. Make sure to ask them “will you be a fiduciary on my plan”. Review their contract to verify their status. For safety sake, have your ERISA attorney review the contract.
(1) A Plan Sponsor’s Fiduciary Calling to Improve the Retirement Readiness of Plan Participants
(2) The Resource Optimizer™, Aligning Plan Needs with Service Provider and Specialist Support
(3) The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
(4) Securities and Advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.
(5) The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with residents of the following states: AZ, IL, MI
