PLANADVISER - November/December 2018 - 40

servicing strategies
documentation of processes and to see who is responsible
for them; the timing of contribution deposits-a big area
of focus for the agency right now; fiduciary training; the
possible presence of an investment policy statement (IPS);
and confirmation that the plan document is up to date and
accurate.
This is where that fiduciary vault is useful. Roberts says
one of the most helpful things advisers can do is to educate
plan sponsors about what documents should be retained in
their files. The Pension Resource Institute has a sample fiduciary
file to show sponsors what should be saved and how
to organize it. The institute has also compiled a list of the
documents the DOL will request and the questions it will
ask. The questions are catalogued, so a plan's adviser can
tell the sponsor, " This is what the DOL is asking for. Could
you respond, and where are your documents? "
To not overwhelm plan sponsors, the institute divides
plan sponsor fiduciary duties into three buckets: investments;
service provider selection; and monitoring, administration
and reporting. " If the DOL sees a haphazard, ad
hoc approach to keeping documents, or if the plan sponsor
tells the DOL it needs more time to produce information
then still doesn't have documents, that itself is a red flag, "
Roberts says.
His firm tells plan sponsors, complying with these duties
is not as difficult as it sounds. The sponsor does not have to
be perfect, just prudent, considering the best interest of its
participants.
For each of the three buckets, plan sponsors should have
an objective description of the decisions they have made.
Roberts says a benchmarking or request for proposals (RFP)
is not a process; it is part of a process. What is a process, for
example, is making sure loan repayments and contributions
are remitted on time. Creating documentation that shows
plan sponsors are following a process is the best defense,
which will result, most likely, in the DOL moving on.
Some plan sponsors without advisers tend not to know
where to go for documentation, he says, so, for advisers, this
is an extremely vital value proposition. -Rebecca Moore
KEY TAKEAWAYS
* In recent years, plan sponsors have needed to make
more corrections because of DOL audits.
* An adviser can play a key role in guiding plan sponsors
on their fiduciary responsibilities, so they can survive
an audit.
* Documenting information about the plan is essential,
and, for the annual audit, recordkeepers can help
gather data.
Advisers Under the Microscope
T
he Department of Labor (DOL)'s
Employee Benefit Security Administration
(EBSA) has been investigating the receipt of
improper or undisclosed compensation
to ensure that plan fiduciaries and participants
receive
comprehensive disclosure
about service provider compensation and
conflicts of interest. Some retirement plan
advisers have been the target.
Jim O'Shaughnessy with Sheridan Road
says his Employee Retirement
Financial
Income Security Act (ERISA) practice was
such a target of investigation. He stresses
that the DOL's particular area of interest
was which of the firm's services were settlor
functions and, thus, were ineligible to be
paid for by commissions or from ERISA plan
accounts.
" They
focused on
the whole area
around settlor functions and expenses,
making sure if settlor functions were being
provided by us that we were always paid
for them directly by plan sponsors, " he
says. " They wanted to make sure there was
a very transparent process concerning how
that is structured with clients. "
O'Shaughnessy says he now believes
the retirement plan industry's interpretation
of " settlor function " is not black and white
and contends the DOL has a different
definition of the term than advisers do. He
points out that many advisers in the retirement
plan industry, whether broker/dealers
(B/Ds) or
registered investment advisers
(RIAs), view helping with plan design as part
of their value proposition; they also help
with mergers and acquisitions (M&As). Both
are settlor functions, according to the DOL.
Advisers cannot be paid through plan
assets if they are providing what the DOL
deems settlor functions. For example,
O'Shaughnessy says, if a broker receives
commissions as payment from a 401(k) or
403(b), but consults on how the company
match is structured or on making the plan
a safe harbor plan, the DOL deems those
to be settlor functions; in those cases,
being paid with commissions is a prohibited
transaction and that broker should be
compensated in a different way.
Sheridan Road has set up its fee structure
so that a portion of fees is paid directly
by plan sponsors. O'Shaughnessy says this
is a best practice if an adviser or broker/
dealer will, at any time, work on settlor
functions, but most do not receive direct
payments; they receive either 12b-1 fees or
are paid through an ERISA account.
He says DOL investigators were very
patient and thoughtful. " I always felt they
were really just trying to determine whether
we had clients' best interests at heart, " he
says.
There were steps the agency wanted
Sheridan Road to take as a follow-up that
are now best practices for the firm.
O'Shaughnessy says, " We had already
been working on new client agreements, to
comply with the DOL fiduciary regulations.
The DOL reviewed those new agreements
and felt they were more direct and transparent,
especially concerning the settlor
issue. The agency asked us to update all
clients to them in an expedited manner,
and we finished that up this spring. " -RM
40 | planadviser.com November-December 2018
http://www.planadviserdigital.com/planadviser/november_december_2018/TrackLink.action?pageName=40&exitLink=http%3A%2F%2Fplanadviser.com
PLANADVISER - November/December 2018

Table of Contents for the Digital Edition of PLANADVISER - November/December 2018
