I had an interesting experience recently. A prospective client asked me to meet with her company’s administrative support staff to go over their retirement plan management procedures. I asked each member of the staff to explain to me the various duties each performed in support of their company’s 401(k) retirement plan and the amount of time it took to complete their tasks.
In summary, the staff performed the following duties:
- Determine the 401(k) retirement plan entry date for each employee
- Notify new employees of their pending entry date and provide them with the required notifications and 401(k) retirement plan enrollment materials
- Educate newly eligible employees on retirement plan provisions and investment options
- Manually enter salary deferral changes made by employees into the payroll system
- Calculate the company’s pay period matching contribution
- Manually enter pay period salary deferral and company match contributions into the payroll system
- Process employee loans, termination of service distributions, hardship distributions, in-service distributions and Required Minimum Distributions.
- Manually prepare the annual census report for their Third Party Administrator (TPA)
- Complete portions of the Department of Labor Form 5500 and electronically file the form each year
I told the staff, duties 1, 2, 4, 5, 6 & 8 could be eliminated by integrating the services of their record keeper with their payroll provider. In addition, duties 3, 7 & 9 were roles that could be outsourced to a full-service TPA. We figured this would save the staff approximately 50 – 70 hours per year and significantly decrease the risk of compliance errors. They really liked the fact that all this could be done with no increased cost to the company.
My contact excused her staff and asked me to explain her duties as one of the retirement plan trustees. I informed her that all retirement plan trustees are considered fiduciaries because they exercise discretionary authority or control in respect to retirement plan assets. This meant she was personally liable for all retirement plan-related investment decisions and transactions. This was news to her that she didn’t particularly like. However, I told her she could significantly reduce her exposure by hiring a co-fiduciary, i.e. 3(21) or 3(38) to assist the trustees with the investment selection and retirement plan monitoring process. Plus, she could purchase fiduciary insurance to protect the trustees against claims related to plan asset related transactions.
Retirement solutions that save time and lower risk
This is just one example of why I enjoy being a retirement plan consultant. It’s rewarding to provide clients with retirement solutions that help save time, reduce liability and secure retirement outcomes for the employees