For many employers, retirement plans are an important employee benefit. Not only are 401(k) plans key for employee recruitment and retention, many of your clients feel a sincere obligation to help employees save for retirement.
However, your clients may be unaware of the fiduciary risks that come with 401(k) plan administration. Plan sponsors have numerous tasks to complete as a plan administrator, including sending participant notices or making corrective actions based on testing results. If not completed, there are serious ramifications — ranging from fines and/or penalties — that could fall squarely on the shoulders of the HR/employee benefits manager who oversees the plan.
Meeting ERISA administrative obligations
When advising clients, consider positioning services from providers who can act as an ERISA 3(16) Delegated Administrative Fiduciary. With this designation, providers can complete certain key plan administrative responsibilities and take on the inherent fiduciary responsibility for doing so.
Working with a provider who offers 3(16) fiduciary assistance not only protects plan sponsors and makes their lives easier, it can be a point of differentiation for you. Navigating 3(16) services and providers is complex, but the payoff is huge in that the right provider can reduce the burden placed on plan sponsors and better protect them from lawsuits and penalties.
3(16) fiduciary assistance
A 3(16) fiduciary provider can help your clients in various ways, including:
Handling communication distributions
Qualified plans require certain communications be sent to plan participants. Look for a provider who not only helps distribute timely communications — such as the summary plan description, automatic contribution arrangement notices and fund change notices — but also provides a paper trail. If a plan sponsor is audited, this mechanism can help prove that obligations were met.
Easing administrative burden
Many smaller organizations (i.e., 50 to 500 employees) don’t need a full-time person dedicated to plan administration. Oftentimes, the person responsible for these duties has more regular responsibilities, but needs to drop everything the few days each quarter that notices need to be distributed. Not only that, employers who are managing thousands of pages of required plan participant notices often don’t have the right equipment to print, stuff and mail that kind of volume. A provider who can help with this aspect can help save plan sponsors money, while freeing up time for their employees to focus on activities that help the employer’s bottom line.
Reducing interactions with employees’ finances
Plan administrators are responsible for approving certain employee requests, such as hardship withdrawals or loans. However, even HR managers can find it hard to remain neutral when their colleagues are facing tough situations. Delegating these duties to a 3(16) provider can help save time, as well as remove the emotional aspect from the equation. In addition, employees can rest easy knowing their situation is handled with privacy, efficiency and care.
Advisors who aren’t partnering with 3(16) fiduciary providers could be putting their client relationships in danger, as they could be neglecting an important responsibility: helping protect clients from substantial risks. If a client does face an issue with plan administration, they could not only remove their 401(k) provider from the mix, but also get rid of you, too.
About Ken Waineo
Ken Waineo is the senior director of retirement plan business development and sales operations at The Standard. Ken has over 18 years of experience working with 401(k), 403(b), and defined benefit and 457(b) plans. In his role, Ken seeks to find meaningful ways to partner with advisors to solve challenges facing retirement plan sponsors and their employees. Ken graduated from Wheaton College with a bachelor’s degree in psychology and philosophy, and earned his master’s degree in business from Portland State University.
About The Standard
The Standard is a nationwide retirement plan record-keeper with a dedicated presence in local communities. Committed to helping retirement plan advisors and their practices thrive, we offer you support, guidance and tools to make you stand out from your competition. Your clients can benefit from our flexible administrative solutions, fiduciary protection services, and robust education and advice programs that engage and empower employees. We would welcome the opportunity to partner with you. Please contact us at 844.239.3561 for more information.
Ken Waineo is the senior director of business development and sales operations at The Standard. Ken has more than 15 years of experience working with 401(k), 403(b), and defined benefit and 457(b) plans. In his role, Ken helps cultivate, strengthen and broaden channel relationships, in addition to looking for ways to improve the sales process. Ken graduated from Wheaton College with a bachelor’s degree in psychology and philosophy and earned his master’s degree from Portland State University.
