As an organization offering a retirement plan to their employees, plan sponsors are faced with decisions that can affect the entire organization. The plan design, investment line-up, and who the recordkeeper will be are typical for all plans. Beyond these standard decisions, there is the issue of knowing and understanding the ERISA laws that govern retirement plans. Depending on the complexity of your organization and business, not every advisor has the background to help.
Plan decision makers usually have other job responsibilities that can divert their attention, yet since they are considered fiduciaries of the plan, decision makers must act in the best interest of the plan participants and their beneficiaries. How can they if they don’t know what the standards are? The same is true of advisors. Not all are well versed in ERISA law, which is complex and sometimes difficult to interpret. Hiring the right plan advisor can help plan sponsors keep the plan efficient and compliant. While there are certainly others, here are five reasons Employers should consider hiring not just an advisor, but a retirement plan focused advisor:
- Plan advisors can limit the plan sponsor’s risk of large losses resulting from lawsuit penalties, mishandling, audit fines and noncompliance penalties. Good advisors on 401(k) plans are typically experts in ERISA law or have an ERISA counsel at their disposal. Legal expertise is important because plans have many moving parts. Plan advisors serve as fiduciaries on the plan and therefore take on the responsibility of ensuring the plan operates properly
- Plan advisors can leverage their resources to educate participants about the plan and improve overall plan health. In many cases, plan sponsors do not have the time, manpower or expertise to properly educate participants about the plan. Plan advisors are (should be) licensed investment professionals that can conduct seminars and meet with participants to encourage them to participate and prepare for retirement.
- Plan advisors can assist with complicated merger, acquisition and transfer cases that involve a high level of due diligence and attention to detail. Many plan sponsors do not have the time to comb through plan documents, amendments, investment policy statements, and fund lineups to determine the best course of action when major plan changes occur. The right plan advisors can analyze and apply their expertise to ensure there are no breaches in ERISA law.
- Plan advisors protect plan sponsors and participants from excessive fees. The fees are often obscure and difficult to understand at the participant level. Independent plan advisors can negotiate with recordkeepers to ensure the fee is competitive. On the fund level, plan advisors can review the fund lineup and incorporate funds with appropriate fees. Independent plan advisors can also identify and eliminate indirect fees that are hidden in the plan’s investments.
- As investment professionals, plan advisors can ensure the best investment options are available to participants. Advisors will monitor the various funds’ performance, and replace underperforming funds with the best investment available.
Hiring a financial advisor on a retirement plan can reduce the workload for the plan sponsor and mitigate the stress involved in running a plan. Plan advisors will help the plan sponsor understand and manage their fiduciary responsibilities. They serve as a dedicated point of contact for plan sponsors when seeking guidance.
Innovative Investment Fiduciaries is an RIA that advises on over 50 retirement plans throughout the country. We specialize in advising on complex plans that require a high level of due diligence and attention to detail. If you have any questions about your plan and whether you should hire an advisor, contact Innovative here.