PLANADVISER - November/December 2020 - 9

Mark Cover
John Carl
Carl: I'd elaborate on Mark's earlier comment about plans
paying multiple vendors who operate in their own little silos.
Those vendors might be doing a fine job in those silos, but that
does not ensure a plan is being run well or is effective. When
you have an ineffective plan it triggers unsuccessful retirement
outcomes, which is what triggers lawsuits. Plans need somebody
who has a macro understanding of the industry and can
synchronize those multiple vendors and the many documents
outlining their responsibilities.
PA: Are there any metrics that show a payoff for implementing
good governance?
Cover: The easiest and best way we can think about it is the Hero7
tool we're making available through our PlanChampion program.
It produces a score-the Plan Governance Index score-that shows
how a plan is doing and can serve as a benchmark moving forward.
PA: What's the payoff for plan advisers? Are they going to be
able to charge their clients more?
Cover: We can see this going two ways. For some larger plans,
we can envision an adviser carving out a specialist role as CGO
and identify ways to get paid specifically for that effort. More
commonly, we expect to see an evolution of the overall service a
retirement adviser is going to provide plan sponsors in which this
is just baked into their business model and allows them to differentiate
themselves in the marketplace. It really lets them create
a new fiduciary model. If the original model grew narrowly out
of the old environment in which employers offered annuity-type
plans, the fiduciary 2.0 model expanded fiduciary responsibilities
to focus on fees and fund selection as plans moved beyond
relying on annuities. Now we're looking at a fiduciary 3.0 model,
which includes a broader oversight role that considers not only
fees and investments but also good plan administration, governance
and outcomes.
PA: What about costs? Are plan advisers who use the PlanChampion
program going to pay for it?
Cover: MassMutual Investments is bringing this offering to the
industry as part of our practice management program to help
plan advisers deliver strong participant outcomes for their plan
sponsor clients. For plan advisers who work with us, we're not
charging for its use.
PA: Will advisers assume any additional fiduciary responsibilities
or risks by serving as a CGO?
Carl: There are many views on the fiduciary role of plan advisers,
but if you looked at what most are doing and asked plan sponsors
to describe it, I think most would say plan advisers are performing
fiduciary functions in some way, shape, or form-whether they
have a formal fiduciary contract in place or not. In the case of a
plan adviser serving as CGO, we strongly suggest they create a
governance policy document that outlines a framework for how
that plan will be evaluated. We can support them in developing
that. If the document is well constructed, and they follow it, we
don't see any increased liability.
PA: What's your best argument for why a plan adviser should
position himself or herself as a CGO?
Cover: My quick answer would be it's just the right thing to do.
It comes back to why we're all in this business, which is to help
plan sponsors and participants save for retirement. Now that
we've identified a governance gap, there is an opportunity to
address it and ultimately drive better participant outcomes.
Carl: We can't ignore the legal climate, either. We're in a super
litigious environment where we're now expecting a five-fold
increase in lawsuits. At the root of that is a deficiency in governance.
If plans had a proper governance structure they wouldn't
be quite the punching bag they are right now. To sum up, there's
a need for this on the plan sponsor side due to the litigious environment
we're in, and there's a need for it on the plan adviser
side to demonstrate that they're doing more than just picking
funds and benchmarking a plan. It's the natural evolution of the
practice management part of a plan adviser's business. It will
help plan sponsors reduce the risk of vicious lawsuits, and it will
help plan advisers further justify the fees they're charging for
the good work they're doing. l
* " 401(k) Fee Suits Flood Courts, Set for Fivefold Jump in 2020, " by Jacklyn
Wille, Bloomberg Law, August 31, 2020
https://news.bloomberglaw.com/employee-benefits/401k-fee-suits-floodcourts-on-pace-for-fivefold-jump-in-2020
The
Retirement Learning Center is not affiliated with MassMutual or any of its
subsidiaries. The opinions expressed in this article include those of RLC and not
necessarily of MassMutual or any of its subsidiaries. The opinions are subject
to change.
Plan advisers is defined as the service financial professionals provide to
defined contribution plans as fiduciaries under ERISA 3(21) or 3(38) only,
even though the financial professional may offer other services outside of
their investment advisory role.
MassMutual Investments is the marketing name for certain investmentrelated
businesses, products, and/ or services of Massachusetts Mutual Life
Insurance Company (MassMutual) and its affiliates, including MML Distributors,
LLC (MMLD), MML Investment Advisers, LLC (MMLIA), and the MassMutual
Funds family of mutual funds. The MassMutual Funds are offered
through MMLD as the principal underwriter and distributor. MMLIA provides
investment advisory services to the MassMutual Funds. MMLD is a member of
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100 Bright Meadow Blvd., Enfield, CT 06082, are subsidiaries of MassMutual.
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https://news.bloomberglaw.com/employee-benefits/401k-fee-suits-flood-courts-on-pace-for-fivefold-jump-in-2020 https://news.bloomberglaw.com/employee-benefits/401k-fee-suits-flood-courts-on-pace-for-fivefold-jump-in-2020 http://www.FINRA.org http://www.SIPC.org

PLANADVISER - November/December 2020

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