LUTZ BUSINESS INSIGHTS
Selecting and Monitoring Retirement Plan Service Providers
PUBLISHED: MARCH 23, 2018
The selection and monitoring of retirement plan service providers is a fiduciary duty. This module describes the various service providers typically engaged by plan fiduciaries to assist with plan administration. It also describes suggested best practices to ensure that such service providers are independent and objective professionals.
Plan Fiduciary Responsibilities with Respect to Service Providers
Prudently select and monitor all plan advisers, providers, auditors, and all other service providers. They must have a documented process. Monitor them by conducting plan benchmarks every three to four years. It is also important to ensure all parties’ fees are fair and reasonable.
Department of Labor (DOL) Guidance
The DOL published a recommended list of specific questions plan fiduciaries should ask and have answered by these parties. They also, for their audit process, request information from plan fiduciaries about these providers including:
- their name, organization, and location
- copies of all engagement agreements
- copies of any management letters
- all parties’ fee schedules
Procedural Best Practices
First, focus on the service provider’s ability to provide the necessary services to support the plan. Next, focus on the service provider’s experience and expertise. A good tactic is to focus the conversation around how to engage the service provider. Finally, ensure plan expenses are “fair and reasonable”. This does not mean the cheapest but is interpreted to mean competitive to the market.
Plan advisers are professional consultants hired by the plan fiduciary to assist with the management of the plan. Typically, they perform fiduciary services around investment due diligence and selection, provider selection, plan benchmarking, and committee meetings. Plan advisers are generally financial registered representatives or investment advisers.
Services vary greatly from plan adviser to plan adviser so it is important to make certain that comparisons are accurate in writing. Make sure your plan adviser is a fiduciary (not all advisers are fiduciaries).
Providers are individuals or entities hired to provide administrative services to the plan. These providers typically include record keepers, third-party administrators, and investment management companies. Depending on the services provided, these providers may not function as a fiduciary.
Employee benefit plans with 100 or more participants are required to have an audit as part of their obligation to file and annual return/report (Form 5500). There is a small plan exception if there is less than 120 participants and they filed as a small plan the previous year.
A plan sponsor, in conjunction with the plan administrator, should hire an independent qualified public accountant. An audit helps protect the assets and the financial integrity of the employee benefit plan and ensures the necessary funds will be available to pay for retirement benefits.
Overall, it is important to implement and complete a documented process to select and monitor all plan service advisors and providers. Doing so will ensure you are receiving the necessary services from the right providers at a fair price.
Important Disclosure Information
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Lutz Financial), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Lutz Financial. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Lutz Financial is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Lutz Financial’s current written disclosure statement discussing our advisory services and fees is available upon request.
COPYRIGHT 2018 RPAG. ALL RIGHTS RESERVED.
120 VANTIS, SUITE 400 ALISO VIEJO, CA 92656 949.305.3859
CHRIS WAGNER, CHFC®, CFP®, CPFA® + INVESTMENT ADVISER
Chris Wagner is an Investment Adviser at Lutz Financial. With 15+ years of relevant experience, he specializes in providing company and corporate retirement plan consulting and investment advisory services. He lives in Elkhorn, NE, with his wife Kristin, and children Brynn and Owen.
AREAS OF FOCUS
- Retirement Plan Consulting
- Investment Product Analysis
- Provider and Fee Benchmarking
- Fiduciary Guidance
- Plan Design Analysis
- Investment Advisory Services
- Participant Education
AFFILIATIONS AND CREDENTIALS
- National Association of Plan Advisors, Member
- CERTIFIED FINANCIAL PLANNER®
- Certified Plan Fiduciary Advisor®
- Chartered Financial Consultant
- BSBA in Marketing, Midland University, Fremont, NE
- American College of Financial Services, Bryn Mawr, PA
- Knights of Columbus, Member
- St. Wenceslaus, Volunteer Coach
- Tax Credits Increase for Companies Establishing a Retirement Plan in 2020!
- Selecting and Monitoring Service Providers
- Strategies to Minimize Fiduciary Liability
- 3(21) and 3(38) Fiduciary Services
- Tips for Administering a Prudent Retirement Plan
- The 2017 To-Do List for 401(k) Plans
- October 1st Safe Harbor 401k Deadline
- How Are You Paying the Company's Retirement Plan Expenses?
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