PLANADVISER - March/April 2020 - 36
servicing strategies
Hazard Prevention
403(b) sponsors may stave off lawsuits by cleaning up plan governance
O
ver the last few years, 403(b) plan sponsors have
discovered that they have more fiduciary responsibility
than they realized, says Elizabeth Kaido, vice
president of sales for BPAS in Utica, New York.
" Plan sponsors are asking advisers to help them establish
plan governance practices-maintaining and reviewing
plan documents, keeping meeting minutes of decisions, and
reasons for those decisions, and setting participant communication
and education guidelines, " she says.
Responses in two recent years to the PLANSPONSOR
Defined Contribution (DC) Survey bear out that many sponsors
work with, and follow the guidance of, an adviser. For
Employee Retirement Income Security Act (ERISA)-governed
403(b) plans, the percentage that used the services of a plan
adviser or institutional investment consultant in 2016 was
59.2%. In 2019, 73.8% of 403(b) plans overall-ERISA and
non-ERISA-used a plan adviser or investment consultant.
Overall, last year, 84.8% of 403(b) plans said they had
an investment committee, and 76.2% indicated they
had an investment policy statement (IPS).
But while governance practices have improved, 403(b)
sponsors face a new threat: participant lawsuits. David
Levine, a principal with Groom Law Group, Chartered, in
Washington, D.C., says this litigation started with institutions
of higher learning, but now all types of tax-exempt entities
face being sued. " Many have adviser help, but that doesn't
stop plaintiffs from second-guessing decisions, " he says.
The lawsuits, filed on behalf of participants, allege
excessive investment and plan administration fees, unnecessary
expense due to 403(b) plans' multiple recordkeeper
model, and the confusing number of investment options
the plans frequently offer. A large percentage of suits are
being filed by litigators that have targeted 401(k) plans and
repeat many of those claims. However, 403(b)s are different
from 401(k)s, Levine says, and it is important for advisers to
recognize this. It is often impossible to shape a 403(b) like a
401(k), so advisers should not try to fit them into that mold.
Until ERISA was passed in 1974, 403(b) plan participants
were restricted to offering annuities, Kaido points out. These
were set up individually by participants, in order to give them
36 | planadviser.com March-April 2020
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PLANADVISER - March/April 2020
Table of Contents for the Digital Edition of PLANADVISER - March/April 2020
Pooled Strength
Invested in Technology
Keeping Up With The Workplace
The Risks of DC Investing
Let Me Introduce Myself
Small-Plan Governance
Hazard Prevention
New Obligation to the SEC
On Small Plans and Large
PLANADVISER - March/April 2020 - Cover1
PLANADVISER - March/April 2020 - Cover2
PLANADVISER - March/April 2020 - 1
PLANADVISER - March/April 2020 - 2
PLANADVISER - March/April 2020 - 3
PLANADVISER - March/April 2020 - 4
PLANADVISER - March/April 2020 - 5
PLANADVISER - March/April 2020 - 6
PLANADVISER - March/April 2020 - 7
PLANADVISER - March/April 2020 - 8
PLANADVISER - March/April 2020 - 9
PLANADVISER - March/April 2020 - 10
PLANADVISER - March/April 2020 - 11
PLANADVISER - March/April 2020 - 12
PLANADVISER - March/April 2020 - 13
PLANADVISER - March/April 2020 - Pooled Strength
PLANADVISER - March/April 2020 - 15
PLANADVISER - March/April 2020 - 16
PLANADVISER - March/April 2020 - 17
PLANADVISER - March/April 2020 - 18
PLANADVISER - March/April 2020 - 19
PLANADVISER - March/April 2020 - Invested in Technology
PLANADVISER - March/April 2020 - 21
PLANADVISER - March/April 2020 - 22
PLANADVISER - March/April 2020 - 23
PLANADVISER - March/April 2020 - Keeping Up With The Workplace
PLANADVISER - March/April 2020 - 25
PLANADVISER - March/April 2020 - 26
PLANADVISER - March/April 2020 - 27
PLANADVISER - March/April 2020 - The Risks of DC Investing
PLANADVISER - March/April 2020 - 29
PLANADVISER - March/April 2020 - Let Me Introduce Myself
PLANADVISER - March/April 2020 - 31
PLANADVISER - March/April 2020 - 32
PLANADVISER - March/April 2020 - 33
PLANADVISER - March/April 2020 - Small-Plan Governance
PLANADVISER - March/April 2020 - 35
PLANADVISER - March/April 2020 - Hazard Prevention
PLANADVISER - March/April 2020 - 37
PLANADVISER - March/April 2020 - New Obligation to the SEC
PLANADVISER - March/April 2020 - On Small Plans and Large
PLANADVISER - March/April 2020 - 40
PLANADVISER - March/April 2020 - Cover3
PLANADVISER - March/April 2020 - Cover4
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