The news is full of lawsuits against retirement plans, regardless of size, because of the trustees’ failure to actively monitor plan costs, services and investment options. As the trustee of your corporate retirement plan you have a fiduciary duty to ensure that a documented monitoring process is in place to protect the interests of the plan participants. One of the best ways to accomplish this is to have an independent, and objective, analysis of your plan in a fiduciary file.
You have a fiduciary file for your company retirement plan, don’t you? It should contain the Plan Document, Investment Policy Statement, Education Policy Statement, meeting minutes, benchmarking done every three years, documents to support plan decisions, fidelity bond, etc. This is your first line of protection.
Protection? Why do you need protection? As a plan trustee you are both professionally and personally liable. Has your plan hired a fiduciary to help mitigate this liability? Keep in mind that most financial advisors do not serve in a fiduciary capacity.
The primary objective of your retirement plan is to help attract and retain your most important asset – people. You want to help employees save for retirement because you care about them. Fees to advisors, record-keepers, custodians, third-party administrators and mutual funds are hard to find and are often higher than they should be. A plan analysis should itemize plan fees and specify to whom fees are being paid. This could provide leverage for your negotiations with the plan providers.
As an example, a recently initiated retirement plan assessment was done by collecting plan data from the plan provider, the provider magically offered an annual fee reduction of 0.25%. This fee reduction will save participants $10 million plan approximately $25,000 every year. No, the client did not stay with the same provider.
Ferreting out fees is just one part of an independent plan analysis. How are the investments performing? Are there less expensive alternatives that have similar, or better, performance? Does the plan provide a good mix of asset classes? Are there too few, or too many, fund options? An analysis should uncover these answers, and much more, about your plan investment alternatives.
Finally, an analysis should compare the services that you are paying for against the services that are actually being delivered. It could also reveal “overlaps” in service. In one of case, a plan was paying two service providers for investment advice. The analysis illustrated how the trustees could save the plan approximately $10,000, annually.
Saving $25,000 in one case and $10,000 in another is significant. However, these numbers turn out to be even more significant when you consider these are annual savings.
Additionally, improving investment options, expanding plan services and reducing the trustee’s personal liability should all be top priorities. If ever questioned about your fiduciary procedures through a lawsuit or DOL/IRS investigation there is no better way to demonstrate your process than through an independent, third-party Fiduciary Benchmarking Analysis.
ProVise Management Group, LLC. provides this service throughout the Tampa Bay Area and beyond. Further, we do it with a guarantee: If the analysis does not uncover enough savings over a two-year period to offset the analysis fee, we will refund the fee and you retain the report for your fiduciary file.
ProVise Management Group, LLC
611 Druid Road E, Suite 105
Clearwater, FL 33756
4350 W Cypress, Suite 225
Tampa, FL 33607
727-441-9022
The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and are subject to change.
Investment Advisory Services may be offered through ProVise Management Group, LLC.
©ProVise Management Group, LLC 2019 (www.provise.com)
