It's best practice to regularly evaluate your company's retirement plan, and for businesses, that should include a thorough review of all your plan has to offer. With fiduciary duty on the line, not taking the time to carefully review and make any changes can be costly. But how do you know when it may be time to pull the plug and switch your service provider rather than just make tweaks to your plan? Here are some things to keep an eye out for.
Tax savings are often a main driver for offering a retirement plan, but your plan can lose its tax-qualified status, and fiduciaries can become liable for potentially significant penalties if your service provider falls short on compliance. Is your recordkeeper proactively monitoring your plan and complying with the legal and regulatory requirements? Or does it only get involved after an issue arises, which can be years later and typically more time-consuming and costly to correct? Does your provider review your plan documents for compliance with changing regulations and prepare any necessary amendments? Or do they alert you to regulatory changes and leave the rest in your hands?
Think about the kind of data your service provider has on your employees, and then think about what can happen if that data gets into the wrong hands. A data breach can put your employees’ personal information at risk, create strained relationships with your workforce, and expose company fiduciaries to liability. It’s important to know how your service provider protects your employees’ information and what it will do when something goes wrong. Most importantly, your provider should:
It is critical to dig into the details of your recordkeeper’s fees, especially in light of the numerous class actions where employers and fiduciaries are being sued for operating a plan with allegedly excessive fees. You do not need to select the least expensive provider, but you do need to make sure the fees are reasonable for the services provided. Some things to look out for include:
Advisors have a golden opportunity to help clients understand what they’re getting and the reasonableness of the charges. While some employers may want to avoid change due to the change management associated with switching providers, the implications of staying with the wrong provider are far greater.