Last week, a blog post entitled, “Are 3(16) Plan Administrator Arrangements a Sham?” delineated the difference between a selective 3(16) service provider (who absorbs only a small amount of plan sponsor responsibility) and a full-service 3(16) provider (who agrees to be the named fiduciary for the plan).
The full-service 3(16) plan administrator was termed “the gold standard” for plan sponsors who seek to significantly reduce their fiduciary liability and outsource the majority of their plan responsibilities.
So, you’ve found a full-service 3(16) plan administrator who submits themselves to annual monitoring and states their fiduciary liability in their contract.
Have you struck gold?
Not so fast.
A closer look at the concept of finding a “gold standard 3(16) plan administrator” means asking the following question:
- What characteristics does a full-service 3(16) plan administrator have to demonstrate to truly set the standard for the industry?
Following is a list of the top 10 traits embodied by the best providers in the industry. Indeed, the gold standard of plan administrators will:
- Implement a Plan Administrator workflow that fulfills ERISA requirements of loyalty and prudence on behalf of plan participants;
- Remain free of conflicts by not providing any other services to retirement plans such as investments or investment advice, recordkeeping, and third party administration;
- Possess expertise and longevity in the complexities of retirement plan operations;
- Communicate with clients in jargon-free language;
- Make reconciliation of plan expenses for services easy to understand;
- Obtain a regular independent review of the client’s fiduciary support systems and practices;
- Be transparent about all sources of income;
- Update contracts as services change;
- Deliver relevant, succinct status reports; and
- Facilitate formal fiduciary training for clients.
If you’re searching for “gold” in outsourcing your fiduciary liability, be sure to sift just a bit deeper to determine the true characteristics that will ensure you are in the right hands. Full-service help seems to be everywhere you look…but best in class is one of a kind.
