Eric Lazzari

Evaluating Your Fiduciary Process

Evaluating Your Fiduciary Process

Believe it or not, an efficient retirement plan committee does not happen by chance. The “best practices” your committee upholds form the foundation for a prudent fiduciary process creating an opportunity for employees to pursue their retirement goals. Companies of any size can benefit from a consistent process and should consider implementing a few of the tips below.

Evaluate What’s Established

If you have a company 401k plan and you are on the retirement committee, then you are a plan fiduciary. As such, you have many duties and responsibilities to uphold to help support plan compliance to the benefit of your company and the plan participants.  This is a great opportunity. However, is there more you can do to help limit liability and create a track for retirement readiness?

It’s more than likely you have a process in place to monitor and manage the company retirement plan; but with this process in place, have you been able to:

  • Measure the success of your plan?
  • Evaluate provider relationships and plan services and fees?
  • Limit liability?

If this doesn’t evoke a confident answer, let’s take a step back and review how you can create a repeatable process.

Process, Process, Process

Creating a repeatable process can help limit liability by demonstrating that you have carried out your responsibilities properly by documenting the procedures used and the thought process involved to fulfill your fiduciary duties.[1] Additionally, a well put together and effective retirement plan committee is the foundation of successful fiduciary decision-making and organizational risk management for plans of all sizes.[2]

Choosing the right team

First things first, who is on your team? If you’ve assembled a committee team, it may include a business owner, CEO, CFO, President, Human Resources Managers, and/or other professional colleagues. Surprisingly, members of your retirement plan committee don’t need to be experts in retirement or investing; however, they should be committed to the task and have a reputation for making good decisions.2


Within your team, you must delegate roles and begin documenting all plan actions and why they are prudent. Proper documentation serves as proof that the committee’s responsibilities are being prudently executed.[3]

Here are some of what the retirement plan committee’s minutes should include:3

  • List of all party’s present with identification of roles
  • Description of all issues considered at the meeting
  • Documentation of all materials reviewed during the meeting
  • Documentation of all decisions made and the analysis and logic supporting each

Identification of any topics to

The Prudent On-going Process

Once your committee is in motion, it’s time to start the on-going process of monitoring, reviewing, and evaluating information. When you review your company retirement plan, create a checklist of the following:

  • Gather all plan related documents
  • Create folders
  • Read through and understand the information
  • Ask team members to assist if needed

Once the delegated committee member has reviewed the plan, it’s time to evaluate provider relationships and plan services. Consider evaluating retirement readiness, plan administration, costs, investments, and service providers.

As your committee monitors the plan, ask yourself and the team members one important question: How could you make your company’s retirement plan offering better? Some suggestions could be fiduciary advisor investment review, fee benchmarking, auto enrollment, and auto escalation.

Maintenance within the Retirement Committee

Providing Fiduciary Training

As mentioned, your committee isn’t required to have retirement and investment experts. That being said, it is crucial to provide fiduciary training so they can be educated and fully equipped to serve on the retirement plan committee. Key areas to cover should include the definition of a fiduciary under ERISA, the basic duties and responsibilities required, fiduciary best practices, investment considerations and prudent process, and an overview of current legal and regulatory trends.[4]

How Often Should a Committee Meet per Year?

Industry experts suggest meeting 2-4 times per year: formal meetings should occur on a regular basis and should not take more than 1-2 hours if well-organized.4 Scheduling meeting at the beginning of the year tends to be effective for all parties.  One idea is to pre-schedule and put the placeholder dates on their calendars so you have the meetings calendared and set for the year.

Looking Forward

Why should you evaluate your fiduciary process? As retirement plan committee members, you want your employees to reach a successful retirement, so always focus on the outcomes. Additionally, having a compliant plan can limit your liability as a plan sponsor. Lastly, ERISA is about process! The committee needs to keep repeating, refining, and improving the company’s retirement plan; because at the end of the day, you want all of your employees to win at retirement.


Mid Year Plan Checkup

Your Mid-year 401(k) Plan Check-up and Tune-up

As we round the corner to 2018, I can’t help but wonder, where did the year go? It feels like January and New Year’s resolutions were just yesterday.  Alas, those days have come and gone, and the “next” New Year is only a few months ahead.  This means now is the time to focus on benchmarking, evaluating your plan, reflecting on what you had hoped to accomplish, and putting 2018 plans together to work towards enhancing retirement plan success.

Three Point Check-Up

Let’s not ignore the elephant in the room: cost.  If it’s been a while since you have price evaluated your company’s retirement plan, this is a great time to open the hood and find out exactly what you are paying.  As an ERISA plan fiduciary, you have a duty to understand your costs and determine reasonableness.[1] 

Some areas to review include:

  • Investment expense ratios
  • Recordkeeper asset charges and fixed dollar costs
  • Advisor commissions and/or fees
  • Third Party Administrator (TPA) invoices

Your service provider partners are consistently making improvements to their offerings, including better user interfaces on their websites, an increased ability to take on administrative tasks (thus freeing up more of your time), and working towards better communication programs to promote retirement readiness. It’s important to conduct a cost analysis to review how much your plan is paying and match services to align with your plan’s needs.

Tune-Up: Cost Reasonableness

Conduct a cost analysis for your company’s retirement plan.  Benchmark your plan compared to other plans of similar size, industry, and demographic.  Document the process.  Determine the value of the services and assess fee reasonableness.  There is value and there is cost.  Remember cheaper is not always better. Match value and cost to determine fee reasonableness.

According to a recent study, the #2 concern of plan sponsors is: retirement readiness.[2]  This is your employee’s ability of to actually retire.  During your next committee meeting, look at your participant data and discuss retirement readiness. 

Some questions to consider include:

  • What percentage of employees are participating in the plan?
  • What is the plan’s average deferral percentage?
  • Are your employee’s investments properly diversified?
  • What is the targeted income replacement ratio for our employees?

A best practice when reviewing participation, deferral, and allocation is to remember the 90-10-90 rule.  This means that 90%+ of your employees are participating in the plan, employees are deferring 10%+ of their income to their retirement savings, and 90% of the participants are invested in appropriate portfolio allocations.

Tune-Up: Retirement Readiness

If your plan has less than 90% participation rate, you might consider a backsweep campaign.  This could be a great January 1st initiative that aligns with the top New Year’s resolution: save more money.[3] 

Next, as a plan sponsor, you could add an automatic auto-escalation feature to your plan.  Talk with your service provider, advisor, and Third Party Administrator (TPA) about how to add this progressive feature. Consider helping your employees boost their savings rates by adopting a 2% auto-increase strategy. 

Re-enrollment is a great way to engage employees who might have a “set-it and forget-it” approach to investing. This  process reinvests all participants into your plan’s Qualified Default Investment Alterative (QDIA).  This is a Safe Harbor provision that could add a layer of plan protection for you as the plan fiduciary.[4]

Tune-Up: Plan Design

The last check-up to consider is plan design. Is it meeting your plan objectives? Did you have corrective distributions last year?  Do you want to reward top talent employees?  Would you like to put away more for specific groups of employees?  As an employer, would you like to contribute less?  Most importantly, what is the goal of your company’s retirement plan?

By having a conversation with your TPA and reviewing your plan design now (most deadlines for plan design changes are October, so schedule your meetings today), you can update your plan information and be ready to implement it by January 2018.  Your TPA will need your company’s census data and a clear understanding of what you would like to achieve. 

Whether there are little changes to profit sharing or larger updates, like new comparability cross-tested plan design, it all starts with a conversation.  Setup a call with your TPA to discuss your plan objectives and how best to align your business goals with your plan design objectives.

Start Early to Maximize Success

December will be here soon enough, so don’t get caught asking yourself, “Where did the year go?”  Work with a qualified retirement plan advisor to discuss your retirement plan’s cost reasonableness, retirement readiness statistics, and proactive plan design options.  These are three key metrics to overall plan success that may help your firm become an employer of choice.

For information or help in evaluating these check-up and tune-up ideas, feel free to contact us to setup a conversation.

[1] “Understanding Retirement Plan Fees and Expenses.” Department of Labor.

[2] “Sponsor Perceptions of Retirement Plan Services” VOYA. January 2017.

[3] “2017 New Year’s Resolutions: The Most Popular and How To Stick to Them.” NBC News.

[4] “Using Re-enrollment to Improve Participant Investing and Provide Fiduciary Protections.” Drinker Biddle & Reath LLP.

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