PLANADVISER - November/December 2020 - 8

From Fiduciary 2.0 to 3.0-
Carving Out a Role for Advisers
As Chief Governance Officer
THE DEMANDS on retirement plan sponsors
have never been greater: coordinating
plan operations, assuring regulatory
compliance, delivering positive outcomes
for plan participants. To help, MassMutual
Investments has launched a practice management
program for plan advisers, " PlanChampion, "
that can help position them in a
new role as chief governance officer for the
plans they serve. To find out more about
this new concept and how it works, PLANADVISER
spoke recently with Mark Cover,
Head of Defined Contribution Investment
Only Field Sales for MassMutual Investments,
and John Carl, founder and President
of the Retirement Learning Center,
whose ERISA consulting services are available
as part of the PlanChampion program.
" It puts the
adviser at
the center of
the client's
plan, making
them the
quarterback
of the plan. "
PLANADVISER: Why is MassMutual Investments
proposing that retirement plan advisers
start functioning as Chief Governance
Officers (CGO)?
Mark Cover: As a provider of investment management services
to the retirement plan community, we've seen that there's a gap
in plan governance processes that can hinder positive outcomes
for plans and plan participants. Specifically, there is often no
deep coordination of the many service providers plans use-
third-party administrators, custodians, trustees, fiduciaries. We
saw an opportunity to leverage our knowledge and expertise to
help advisers address these problems and ensure that plans are
able to deliver the outcomes they want.
PA: How does the program work?
Cover: It puts the adviser at the center of their client's plan,
making them the quarterback of the plan, if you will. The PlanChampion
program offers two important resources to help them
fulfill that responsibility. One is the Hero7 tool, which through a
series of questions documents whether key governance issues
are identified in plan documents and addressed. Hero7 takes all
the elements of what a CGO does and helps the adviser manage
and create a benchmark report on the entire process. The
other important resource in our program is John's company,
the Retirement Learning Center, which can support advisers in
evaluating vendors, interpreting plan documents, and spotting
any inconsistencies or misalignments between those documents.
PA: Did the COVID-19 pandemic impact the need for this kind
of service?
Mark Cover
Cover: It did. When the pandemic struck,
many employers had to scramble to make
sure they remained economically viable.
That forced difficult decisions around
whether to furlough employees, terminate
employees or perhaps terminate the company's
matching contributions to its retirement
plan. This shined a light on the many
interlocking pieces of a retirement plan and
how they must be considered in concert,
especially in times of stress. We saw it as
a teachable moment-a chance to bring a
more holistic governance approach to plans,
and a way to identify and address some of
the challenges the pandemic had exposed.
PA: What kind of liabilities are plans facing
if they don't beef up their governance capabilities?
John
Carl: According to Bloomberg Law,
proposed class
action lawsuits claiming
excessive 401(k) plan fees are on track
for a five-fold increase between 2019
and 2020.* But these lawsuits, boiled down to their essence,
are about governance. The bottom line is plan sponsors keep
getting tagged, the stakes are higher than they ever were, and
the scrutiny is only going to get greater. It's time for organizations
to apply the same governance standards they apply
at the corporate level to their retirement plan, because their
retirement plan is an extension of their organization. And it's a
potential lightning rod for litigation right now.
PA: What are some of the issues that get uncovered when this
kind of oversight is implemented?
Cover: There's a common thread, highlighted by that lack of
the synchronization across all the various service providers
plan sponsors are using, and it can lead to some surprising
missteps. One big finding is that despite all the talk these
days about participant outcomes, there's often no documentation
structure or process around delivering them. We also
see with many plan sponsors a poor understanding of who is
acting as a fiduciary for the plan, including who they are and
what kind of fiduciary they are. While some service providers
willingly acknowledge fiduciary status, many do not. In those
cases, service agreements tend to be written to protect the
providers from fiduciary status. But regardless of what the
contract says, if a service provider exerts control over a
plan, it becomes a " functional " fiduciary-and must be held
accountable for that responsibility.
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PLANADVISER - November/December 2020

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