Qualifications to help you offer optimal choices for your employees.
A standout benefits package is a must if you are to attract and retain top employees. As a plan sponsor, however, you have certain responsibilities. Because you will have discretion over decisions and actions related to the plan's investments, you are also a fiduciary. When you appoint one or more employees to perform plan-management activities, they become fiduciaries as well. All your plan's fiduciaries should understand their regulatory compliance and ethical responsibilities.
The Employee Retirement Income Security Act (ERISA) sets standards of conduct for the fiduciaries who manage an employee benefit plan and its assets. They must be able to demonstrate that the process for making decisions affecting the plan is prudent and in the interest of plan participants and beneficiaries, with documentation of decisions and the basis for making them.
Where fiduciaries lack expertise, it is prudent to hire a retirement-plan service provider with that professional knowledge. Selecting the right provider is a big decision. For your search for and selection of a provider, you will want to have a robust and formalized process, detailed criteria and solid data collection and documentation. Even with an existing plan, it's a good idea to periodically find out what services other vendors are offering and at what cost. Here's an overview of criteria considerations:
Your plan should provide a choice of investment options and opportunities, diversified across asset classes. People with varying levels of knowledge, investment styles and risk profiles have different needs. You want a vendor that can offer a reasonable subset of today's assortment of available funds and provide resources to help employees make their selections. You also want a vendor that will monitor the selection and performance of funds to confirm that they continue to match up with the risk-and-return spectrum you have defined.
Resources for You as the Plan Sponsor
As the plan sponsor, the key services to look for include record keeping, compliance testing, generating statements and reports and providing resources for educating employees. For plan fiduciaries, you want robust online reporting tools, fund reports, quarterly newsletters and news and analysis of industry trends.
Plan Participant Resources
The plan provider should give plan participants a way to learn about the investment solutions being offered. This may include providing general financial investment information and education about advantages of a tax-deferred savings plan, diversification, asset allocation, market volatility and risk/return concepts.
These days, participants will expect online access to their accounts showing their transaction history, fund fact sheets, prospectuses, loan modeling, portfolio rebalancing, quarterly participant newsletters, educational web tutorials, calculators and more. They may also want mobile apps.
Transparent and Competitive Fees
Plan sponsors and participants should be aware of the costs of investments and services associated with their retirement plans. Because the sponsor must show that costs of the plan are reasonable, the ease of monitoring them is important.
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