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.
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.
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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!”
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.
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.
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.
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: