With all the discussion in recent years about the benefits and challenges resulting from the fiduciary rule, the focus seems to be more on a plan’s framework and less on participant outcomes. While the role clarity was productive and good for plans, it did little to help 401(k) plan participants reach their desired outcomes - which is what the the plan sponsor should ultimately be focused on.
By properly aligning fiduciary and non-fiduciary roles and responsibilities, a plan sponsor should be able to determine where the holes are in the service model and take the necessary steps to fill them.
Here’s a summary of some of the most common gaps between the service model and plan sponsor perceptions.
Gap 1: Investment Policies
Discretionary and non-discretionary investment advisory services typically center on making investment decisions or providing investment advice to the plan sponsor. Often this advice includes an investment policy statement for the plan, but the plan sponsor, or the investment committee, is left to own the investment policies. In most instances, the plan sponsor isn’t aware of the significance of the ownership of investment policies or that the policies are as integral to the success of an investment strategy as the selection of funds. It would be advisable for a plan sponsor to check the plan document for the roles of the investment fiduciary and see how well those align with the services agreements and investment policies.
Gap 2: Conflicts of Interest
After years of fiduciary commentary, many are aware of the conflicts within investment solutions that cause a service provider to receive variable compensation from a plan. What many are less familiar with are the other conflicts that could exist. Are there relationships that exist behind the curtain that cause certain platforms or funds to be featured more prominently than others? While fee disclosure certainly makes these soft-dollar costs more visible, many are described with such vagueness as to de-emphasize their importance.
Gap3: Participant Outcomes
While nobody can guarantee participant success, plan fiduciaries should be aware of where their participants are as they work toward their retirement goals. Is there a mechanism allowing plan fiduciaries to see if participants are on track? Who is watching what the participants are doing and calling out behaviors and decisions that will impair their ability to achieve retirement security?
CoPilot is a well-rounded 401(k) solution that provides investment fiduciary services for outsourcing investment policies and keying in on participant behaviors, alleviating responsibilities that sponsors often don’t realize they have and advisors don’t want to take on. By making it easy for participants to track their progress and understand how the decisions they make today could impact them down the road, they’re able to own their retirement readiness.
Let’s start the conversation about how CoPilot can help you navigate the complex requirements of a 401(k) plan and the ever changing guidance.
Contact us to learn more, or give us a call today: 800.236.7400.
Mark Nicholas, CPC - Chief Compliance Officer at eRIA - firstname.lastname@example.org - 800-236-7400 x3423
Mark is the subject matter expert on 401(k) regulations, DOL fiduciary rule, investments, participant advice, audits and compliance.