PLANADVISER - Fall 2023 - 18
Fiduciary status can be a challenge
for small-plan sponsors, which
often lack a well-staffed human
" It's hard for clients on their own to keep
up with all the changing regulations without
having an adviser that can bring the ERISA [Employee
Retirement Income Security Act] team to the table, " Irace
says. " By day, those clients are running their business, then
by night they're acting as a fiduciary, and they may not really
understand what their responsibility is. "
To best service plan sponsor clients, advisers need to not
only stay up to date on current regulations, but remain
prepared to educate sponsor clients about what those regulations
mean for their plans, both short and long term.
Advisers also must make sure the client is crystal clear
about the type of services they are providing and what type
of fiduciary responsibilities they assume.
While plan sponsors can never fully outsource their fiduciary
responsibility, they still must understand the difference
between working with a 3(21) adviser, who recommends
investments but may not execute them without approval, or
a 3(38) adviser, who may invest on her client's behalf. The
service agreement with the sponsor should specifically
outline in which capacity the adviser is working, but it can
also be helpful to discuss that status with the sponsor.
The adviser may also want to discuss 3(16) fiduciary
outsourcing with clients, to alleviate some of the fiduciary
burdens concerning plan administration. A recent survey
by Pentegra Retirement Services found that nine out of 10
advisers said clients spend up to half the adviser's time on
administrative tasks that could be outsourced.
It is also crucial that plan advisers work to develop a
transparent, trusting relationship with their clients, so the
latter will feel comfortable telling them if they have concerns
about a specific fiduciary issue, says Frank Bitzer, an ERISA
attorney and national ERISA consulting leader at Marsh &
McLennan Retirement and Asset Services in Cincinnati.
" As a service provider,
I'm not a mind reader, " Bitzer
says. " If your client doesn't tell you it's struggling or doesn't
understand something, if it doesn't know what its fiduciary
duties are, that's incumbent upon [you, the] adviser, to ask
the right questions upfront and for everyone to understand
there's going to be some education and training. "
To ensure compliance, Irace recommends that advisers
meet with each sponsor at least a few times a year to review
investments compared with their benchmarks, to make
sure plan expenses remain reasonable, and to confirm that
providers are continuing to offer the services promised.
Todd Hedges, director of retirement plan sales at Paychex
Retirement Services in Greenland, New Hampshire, recommends
quarterly meetings. Besides reviewing investments,
Hedges says, the adviser should discuss how he is working
with participants and how his educational or engagement
FOCUS ON DOCUMENTATION
mong the many tasks with which
advisers help their clients, guiding
them through the process of documentation
may be one of the least recognized-and
documentation can protect a sponsor
in the event of an audit or lawsuit.
This applies to clients making any
decisions about their plan, especially
fiduciary decisions, says Frank Bitzer
of Marsh & McLennan. " [Stress that the
client should] document that it put the
question on the table and brought the
right people to the table, " he says.
Strong documentation can make it
easier to keep internal turnover from
affecting the continuity of a plan, he
says. Committee notes should name all
including service providers
that have answered any questions.
Additionally, the sponsor needs
to show that its decision process was
informed, Bitzer says. " ERISA [Employee
Retirement Income Security Act] doesn't
make it illegal to make a bad decision or
bad investment. It is illegal to make an
imprudent decision or investment. "
Case law has historically protected
fiduciaries who can show that they had
an informed and purposeful decisionmaking
process, Bitzer notes.
Besides helping clients set procedures
to facilitate such documentation,
the adviser can do likewise regarding
documentation on choosing service
providers. This should include that the
sponsor conducts ongoing reviews of
both its investments and providers.
A Continuing Process
Since the fiduciary responsibilities are
ongoing, advisers must work with their
clients to make adjustments as facts
and circumstances change, Bitzer says.
" In ongoing plan administration, the
adviser can serve as a second set of eyes
and an arm's-length impartial opinion. "
Bitzer suggests having an attorney
periodically take committee notes
or review notes the committee has
taken, to ensure that the lawyer, as a
third party, agrees the documentation
complies with fiduciary requirements
and would hold up under the scrutiny
of an investigator or auditor.
Of course, documentation is just the
first step in a plan remaining compliant,
and it is crucial that clients take the
next step: implement those policies
described in the documentation.
" If you put it in writing that you're
going to operate in a certain manner,
you'd better do that, " says Brent Petty of
NWCM. " That's where sponsors get into
trouble. They put policies in place and
then just put them in a drawer. " -BB
18 planadviser.com | Fall 2023 | Practice Management
PLANADVISER - Fall 2023
Table of Contents for the Digital Edition of PLANADVISER - Fall 2023
At the Core
A Need to Show Value
The Talent Pipeline
Inside the Deal
Are They Legally Binding?
The SEC on Cybersecurity
From Managing to Leading
Can You Predict Client Stress?
PLANADVISER - Fall 2023 - C1
PLANADVISER - Fall 2023 - FC1
PLANADVISER - Fall 2023 - FC2
PLANADVISER - Fall 2023 - C2
PLANADVISER - Fall 2023 - 1
PLANADVISER - Fall 2023 - 2
PLANADVISER - Fall 2023 - 3
PLANADVISER - Fall 2023 - 4
PLANADVISER - Fall 2023 - 5
PLANADVISER - Fall 2023 - 6
PLANADVISER - Fall 2023 - 7
PLANADVISER - Fall 2023 - 8
PLANADVISER - Fall 2023 - 9
PLANADVISER - Fall 2023 - 10
PLANADVISER - Fall 2023 - 11
PLANADVISER - Fall 2023 - 12
PLANADVISER - Fall 2023 - 13
PLANADVISER - Fall 2023 - 14
PLANADVISER - Fall 2023 - 15
PLANADVISER - Fall 2023 - At the Core
PLANADVISER - Fall 2023 - 17
PLANADVISER - Fall 2023 - 18
PLANADVISER - Fall 2023 - 19
PLANADVISER - Fall 2023 - A Need to Show Value
PLANADVISER - Fall 2023 - 21
PLANADVISER - Fall 2023 - 22
PLANADVISER - Fall 2023 - 23
PLANADVISER - Fall 2023 - 24
PLANADVISER - Fall 2023 - 25
PLANADVISER - Fall 2023 - The Talent Pipeline
PLANADVISER - Fall 2023 - 27
PLANADVISER - Fall 2023 - 28
PLANADVISER - Fall 2023 - 29
PLANADVISER - Fall 2023 - Inside the Deal
PLANADVISER - Fall 2023 - 31
PLANADVISER - Fall 2023 - Demand Performance
PLANADVISER - Fall 2023 - 33
PLANADVISER - Fall 2023 - Are They Legally Binding?
PLANADVISER - Fall 2023 - 35
PLANADVISER - Fall 2023 - The SEC on Cybersecurity
PLANADVISER - Fall 2023 - 37
PLANADVISER - Fall 2023 - From Managing to Leading
PLANADVISER - Fall 2023 - Can You Predict Client Stress?
PLANADVISER - Fall 2023 - 40
PLANADVISER - Fall 2023 - C3
PLANADVISER - Fall 2023 - C4