How Does a Fiduciary Support You and Your Company’s Retirement Plan?

August 13, 2015

Recently, the Obama Administration proposed significant changes for retirement planning – namely, the expansion of fiduciary standards. Such a proposal, if carried out, would greatly increase the number of retirement professionals who would act as fiduciaries on behalf of their clients. A fiduciary is required by law to act solely in the best interest of the plan participants. While the administration’s proposal sounds reasonable, serious questions remain about its functionality, oversight costs and management, and how it particularly affects business owners and plan providers. However, this begs an important question – how do fiduciaries impact business owners and their retirement plans now?

What is my role as a business owner?

As a plan sponsor, you are liable for the retirement plan because you are held to a fiduciary standard. This means you must:

  • Act solely in the interest of the participants.
  • Act for the exclusive purpose of providing benefits to workers and defray reasonable expenses of the plan.
  • Carry out duties with the care of a prudent person familiar with such matters.
  • Follow the plan documents.
  • Diversify plan investments.

Although these duties are spelled out, it is difficult for most business owners and human resource professionals to manage this by themselves. For example, as a 401(k) plan sponsor, you should be able to answer “yes” to the following questions:

  • Are you confident your 401(k) funds are the correct ones?
  • Are your plan providers charging reasonable fees?
  • Are you asking the right questions about your plan?
  • Most importantly, do you know what being a fiduciary means in terms of your specific duties to the plan and the potential for personal liability?

These are daunting questions for many business owners, which is why they often turn to retirement consultants and brokers for help in managing their retirement plans.

What is my retirement advisor or broker’s role?

Retirement advisors and brokers provide many services to their clients, including oversight on performance, diversification of investments, and plan design. What many plan sponsors don’t realize is that more than 80 percent of retirement plan providers are not designated fiduciaries, and plan sponsors may unknowingly be liable if their vendors make a mistake.

How do fiduciaries support my business?

Fortunately, there are ways to provide a retirement plan without taking on unnecessary legal risk. When interviewing potential retirement plan providers, it is important to understand to what extent your interviewees are able to take on fiduciary liability.

A designated fiduciary plan provider can help protect you as a plan sponsor and maximize your business’s potential. At First Western Trust, we provide ERISA 3(38) protection for our clients, meaning we assume the maximum fiduciary responsibility for our clients’ plans. Advisors who provide 3(38) protection offer the training, documentation, and support to help protect you and your business in the event of an audit.

What other measures should I take?

A second useful tool in protecting yourself and your company is benchmarking. A benchmarking report compares your plan’s success metrics, support, services, and fees to those of companies of a similar size in your industry. This specific comparison helps to protect you in the case of a Department of Labor audit and may identify potential plan savings. With this information, you and your advisor can assess the reasonableness of your fees. Through this process, your advisor should modify or design a dynamic plan to meet regulatory compliance and optimize your investments.

With recent discussions about retirement planning and potential regulatory changes, it can be hard for business owners to know what potential pitfalls lie within their plan or plan providers. Proposed legislation could have a big impact on how brokerages and advisors operate going forward, but in the meantime, business owners should understand if their current advisor is a designated fiduciary. They also need to consider the reasonableness of their fees through benchmarking reports and evaluate the effectiveness of their retirement benefit.

If you have any questions about your retirement plan and the responsibilities of you and your plan providers, please contact one of our experienced fiduciary advisors at 303.531.8100.



Investment and insurance products are not a deposit, not FDIC insured, not insured by any federal government agency, not guaranteed by the bank, and may go down in value.


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