Employers have a lot on their plates running their core business let alone the additional fiduciary responsibilities for sponsoring their employee retirement program. These fiduciary responsibilities include navigating the DOL rules and regulations along with vendor oversight and establishing investment parameters. That’s a tough enough job on its own, isn’t it?
To complicate matters, nearly half of all employers aren’t benefiting from the guidance of an independent financial adviser.
Obstacles and Details
With 403(b), 457(b), and 401(k) plans only increasing in density, the services of a licenced and experienced adviser are more valuable than ever. Adjustments in tax codes and plan specifics are relentless, with regulations and laws adding difficulties that put sponsors over their proverbial heads in unsightly red tape.
The good news is there is now more choice than ever when it comes to selecting a plan that supports the dignity and welfare of those of retirement age.
The bad news is that finding those plans – and successfully executing them – is not quite as simple.
Sponsors have the responsibility of finding the best plan to meet the needs of their companies and participants, while executives and fiduciaries face challenges from various sides of the aisle.
The ERISA Example
Consider, for instance, the latest upsurge in messy ERISA class action litigation.
ERISA is the Employee Retirement Income Security Act of 1974.
It was implemented with the goal of determining minimum standards for pension plans in private industry. Designed to require disclosure of financial information concerning the plan, determine conduct standards, and offer federal court access as a lawful antidote to plan mismanagement, ERISA’s goal was – and is – to protect the interests of plan participants.
But a recent rise in ERISA class action litigation has centered in large part around “excessive fees” cases, which allege that participants have been overcharged by plan fiduciaries.
It is typical for an untick in ERISA class action litigation to occur during times of community struggle, like the Great Recession of 2008 or the COVID-19 pandemic. These events expedite market instability, which in turn leads people to suffer financial uncertainty – real or imagined.
That anxiety, in turn, leads to stricter scrutiny of ERISA fiduciary obligations.
Finding Lasting Stability
This has demanded the need for delicate balance.
On one hand, the financial wellbeing and wealth potential of American families must be protected. Things like disproportionate fees may show up in the context of ERISA litigations, but they also reflect real concerns from plan participants – concerns that must be addressed before things get out of hand and reach the level of costly settlements.
On the other hand, corporations have paid out over $6.2 billion in class action settlements regarding these ERISA suits. That is untenable. Robust financial leadership can help fiduciaries map problematic waters and produce viable retirement plans that benefit all concerned parties.
Often, this requires more engaged oversight.
The Role of a Governing Advisor
Plan sponsors are responsible for keeping up to date on the various annual changes to retirement plans, healthcare proposals, and any cost of living adjustments. They must ascertain the details of benefits packages, modify any parts of the plan, or even terminate the plan as required. All of this must be done with complete transparency to participants.
A Governing Advisor can fill in some of the gaps, akin to how an investment advisor proposes certain advantageous investment opportunities or a plan administrator manages day-to-day issues and correlated strategic determinations.
The objective of a Governing Advisor is to provide thorough expertise and experience related to plan governance, operations, design, and implementation. This includes an understanding of factors like fee policy oversight and investment opportunities, with an emphasis on plan participant commitment.
After all, if participants don’t feel they can actually participate in their plans, they are more likely to seek restitution through other opportunities.
A beneficial retirement plan has the answers to tough questions and solutions to tougher problems.
A Governing Advisor charts the course from hazy waters to smooth pastures, addressing the logical concerns of plan participants while certifying that employers and corporations negotiate detrimental litigation and unwarranted complications with facts and participant feedback.
Without clear-cut strategy, involved participants, an empowered sponsor, and a well-informed and sympathetic Governing Advisor, the wellbeing of any retirement plan is in jeopardy.
Given the entrenched obstacles of 403(b), 457(b) & 401(k) plans and any associated litigation, missing the opportunity to guarantee complete plan satisfaction is a major mistake.
