The DOL’s pace of enforcement has produced staggering numbers. For example, in fiscal year 2011, the Employee Benefits Security Administration (“EBSA”), which is the enforcement arm of the DOL, collected over $1.3 billion in fines and asset recovery from ERISA qualified Plan Sponsors. More than 74% of its audits produced economic penalties for the plans it audited.
Many of the causes behind these fines and sanctions are repeated year after year, and include: excessive fees by service providers, provider conflicts of interest, and lack of proper plan oversight. These recurring issues highlight Plan Sponsors’ struggle to adequately perform complex fiduciary duties on their own – and demonstrate the need to outsource these critical responsibilities to an independent, qualified 3(16) Plan Administrator.
Conclusion
An independent ERISA 3(16) Plan Administrator can relieve Plan Sponsors, and their in-house fiduciaries, of the responsibility of managing a retirement plan’s investment decision making process and handling certain key aspects of the plan’s administration. As responsibilities typically borne by Plan Sponsors are shifted to this qualified third party, the Plan Sponsor’s risk management profile is vastly improved.
