As a sponsor of a defined contribution (DC) plan, have you felt an increased responsibility for participants’ financial well-being and success in retirement? When someone starts talking about excessive fee litigation and your fiduciary responsibilities, do you get a little jittery? Does the thought of handling manager underperformance stress you out? If so, you are not alone.
Plan Sponsors have become keenly aware that fiduciary rules clearly state that the decisions a sponsor makes need to put the interests of participants first. This means that plan sponsors must also place a priority on participant outcomes by improving participant engagement and decision-making, adopting strategies that enhance returns and prudently reviewing fees.
Some steps plan sponsors should consider for 2018 are:
Ensure a foundation of sound plan management
Conduct a financial needs analysis for your employees
Establish success measures
Increase diversification through multi-managers
Consider financial wellness solutions
Evaluate managed accounts
Examine retiree-focused tools and investments
The fastest-growing trend in DC plan management is the move to delegating responsibilities to a professional organization. PIMCO’s DC Consulting Survey1 conducted in 2017, “perceived mitigation of fiduciary risk (e.g. litigation)” was seen as the top expected driver of growth in delegated/ outsourced CIO services.
We believe the delegation of fiduciary 3(38) services can potentially improve participant outcomes through simplified investment structures, better diversified investment options, lower fees and more.
Although much of the delegation has occurred with investment fiduciary 3(38) services, plan professionals are also increasingly taking on the administration role as a 3(16) “named fiduciary” under ERISA.
-Larry Adams, CPFA (Midland, TX)