PLANADVISER - January/February 2021 - 33

For sponsors less aware of their plan
governance needs-e.g., not understanding
specific terms of the retirement
plan, such as those relating to
fees-here is a particular place where
advisers can help, sources say: in establishing,
and ensuring the plan follows,
best practices in plan governance.
An analysis of responses to our 2020
PLANSPONSOR Defined Contribution
(DC) Survey-provided by nearly 3,000
plan sponsors representing a broad
range of U.S. industries-bears out this
need, showing insufficient best practices
in plan governance. Advisers may
have more work to do with their current
clients, but they also may find many
potential clients that could use the help
of a good adviser or advisory firm.
Clearly, many plan sponsors desire
help: 72% outsource some fiduciary
responsibilities. A little more than one
in five respondents-22%-have hired
a 3(16) adviser with a broad administrative
scope while 33% have hired
one with limited scope; 10% did not
know if they use a 3(16) adviser.
As it relates to investment advice,
38% of respondents use a 3(21) adviser,
23% use a 3(38), and 29% did not know
if their adviser was either.
Joshua Ulmer, senior institutional
consultant at Morgan Stanley in Portland,
Oregon, says outsourcing can be
attractive not just to plan committees
that feel like they are stretched too
thin. He says an ideal candidate for
3(38) engagement, for instance, is a plan
committee that is dedicated but wants
to focus on other things beyond investments,
such as financial wellness.
ERISA demands, among many other
things, that fiduciary retirement sponsors
carefully evaluate and monitor the
reasonableness of the fees their participants
pay. The law does not stipulate
that one type of fee structure is superior
in itself, nor does it suggest that
all prudent plan fiduciaries must run
their plan the same way, experts note.
According to the survey, 43% of sponsors
calculated all fees paid in the past
year to their DC plan provider/recordkeeper
and externally benchmarked
those fees; 7% calculated the fees and
plan to benchmark them; 17% calculated
fees but did not externally benchSponsor
employs a third-party administrator,
adviser or recordkeeper, etc., as a 3(16) fiduciary*
l Yes, and 3(16) has accepted
broad administrative scope
l Yes, and 3(16) has accepted
only limited administrative scope
l No
l Unsure / Don't know
21.5%
32.5%
35.9%
10.1%
*An ERISA Section 3(16) plan administrator is the fiduciary
responsible for overall governance of the plan, with the exception
of trustee functions. Examples of 3(16) plan governance actions include:
1) the authorization of distributions or loans; 2) actions to enforce or interpret the terms
of the plan; 3) decisions on claims for benefits or other plan-related decisions.
Sponsor's adviser is either a 3(21) or 3(38) fiduciary
to the plan†
l Yes, its adviser is a 3(21) fiduciary
l Yes, its adviser is a 3(38) fiduciary
l Yes, but it uses separate advisers
for 3(38) and 3(21) services
l No
l Unsure / Don't know
†
37.5%
22.7%
1.2%
9.7%
28.8%
A 3(21) and a 3(38) adviser perform the same fiduciary duties except the 3(21) cannot
make investment decisions.
Sponsor calculated all fees paid in the past year
to its DC provider / recordkeeper
l Yes, and externally benchmarked
plan costs / fees in the process
l Yes, and plans to externally
benchmark plan costs/fees soon
l Yes, but did not externally
benchmark
l No, but plans to calculate total
fees in the next 6 months
l No, but may in the future
l Unsure / Don't know
43.3%
6.6%
17.4%
4.1%
15.0%
13.6%
planadviser.com January-February 2021 | 33
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PLANADVISER - January/February 2021

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