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Questions & Answers

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Triangle Our Answers: Business Services


Q: If You are Not Taking Your Retirement Plan Out to Bid Right now, You Should.

Answer from :

We have been taking our clients plans to live bid on a 36 month cycle for the last 12 years, it’s actually a part of our service plan.  The results of those bid proposals, in terms of decreased expenses to participants and/or increased provider services, cannot be overstated.  But the last 18 months has presented 3 unique opportunities that plan sponsors should capitalize on because once gone, we may not see again for a long time.

  • High Account Values – A rising tide floats all boats and the extended bull market has certainly floated retirement plan balances, especially the rapid appreciation in the equity market experienced in 2017. Most recordkeepers look closely at total plan assets and average participant balances when pricing, the higher the better.
  • Bottom of Fee Compression – Since the 408(b)(2) disclosure requirements were fully implemented in 2012 we have seen a steady decline in service provider fees. Today we are at or very close to the bottom of this trend.  We have begun to see a trend of adding additional services for fee or requiring use of certain investments as service providers seek to recoup lost revenue due to fee compression.
  • Changing Investment Trends – The continued trend towards index based investment lineups has driven down costs for actively managed mutual funds too as active managers introduced retirement share classes with low or no revenue sharing. Active ETF and Collective Investment Trust investments (CITs) have begun to appear on more service provider platforms.  The opportunity to drive investment costs for participants lower has never been better.

Over the last 6 months we have seen plan sponsors have more successful outcomes in reducing plan expenses due to live bid RFP’s.  In some cases, though not all, we have seen potential decreases anywhere from 34% up to 68%.  Additionally, live bid RFP’s can provide valuable information to plan sponsors when negotiating with their current service providers.

If you have never taken your plan out to a live bid RFP or if it’s been a while, NOW IS THE TIME!  The stars are aligned to create a potentially great opportunity for your retirement plan participants.  Remember, every dollar saved in expense is a dollar left in participant accounts to compound for their retirement.

Securities and Advisory Services offered through LPL Financial, a Registered Investment Advisor. Member
FINRA/SIPC.


Q: Why should I offer a retirement plan to my employees?

Answer from Kenny:

A retirement plan gives you the opportunity to inspire employees to plan for successful outcomes in the future. Regardless of financial participation, emphasizing education and planning is important for your employees’ financial future. It’s a small price for a motivated, more educated employee. I often say, “it doesn’t cost, it pays!”


Q: What is plan benchmarking and why should I do it?

Answer from Kenny:

Benchmarking involves comparing and evaluating performance levels and processes—looking at the inner workings of the plan to see how well it’s serving participants. Because plan fiduciaries are responsible for properly selecting and monitoring all individuals and entities that provide services to their plan, benchmarking can provide information needed to improve the plan and demonstrates a documented process for making important plan provider decisions. Basically, it strives to ensure the best possible plan at competitive costs for participants.


Q: What is a plan fiduciary and, as a plan sponsor, am I a plan fiduciary?

Answer from Kenny:

A plan fiduciary is someone who assumes decision-making authority or control over the administration of the plan, or who is paid to give investment advice regarding plan assets. The definition depends on the functions a person performs and not on the person’s title. Plan service providers such as actuaries, attorneys, accountants, brokers and record keepers are not fiduciaries unless they exercise discretion or are responsible for the management of the plan or its assets.

As an employer sponsoring a retirement plan, you are always deemed a plan fiduciary under the law.


Q: What is my fiduciary responsibility and liability and can I hire someone to relieve me of that responsibility and liability?

Answer from Kenny:

Fiduciaries have a lot of responsibility when making decisions regarding plan management. A fiduciary must act solely in the interest of the plan participants and their beneficiaries. Fiduciaries’ responsibilities include carrying out their duties with respect to the plan with care, skill, prudence and diligence, following the terms of the plan document, diversifying plan assets and paying only fair and reasonable expenses.

Fiduciary liability can include both criminal penalties and civil action. A fiduciary is personally liable for any losses resulting from a breach and the penalties can be severe. While fiduciaries/trustees may look to hire outside professionals as co-fiduciaries, they still have the responsibility to monitor such individuals or entities. Failure to do so exposes the fiduciary to liability.


Q: How can I help my participants become more financially ready for retirement?

Answer from Brandon:

The key to helping participants become more retirement ready is to adopt a much broader mindset in regard to your plan. This mindset moves beyond investment options and fiduciary warranties and focuses on designing a plan properly to increase the likelihood of better retirement outcomes for participants.

Some of the tactics a plan sponsor/trustee can consider utilizing in order to help their participants become more retirement-ready include:

  • Proper use of automatic features to get people in the plan and increasing contributions on a systematic basis
  • Greater utilization of asset allocation models, as well as professional investment management
  • More targeted and engaging participant communications that focus on participants’ income needs in retirement vs. current contributions
  • A focus on plan monitoring and governance to drive plan efficiency and cost effectiveness.