Roland|Criss cuts risks and improves operations
The 4D Framework™ represents a paradigm shift in how employee benefit plans (or “EBPs”) approach fiduciary effectiveness. EBP committees and human resources leaders have previously pursued a risk mitigation approach that concentrated on the fiduciary roles and categories outlined in the Employee Retirement Income Security Act (“ERISA”). That approach relied on difficult to quantify answers to these questions: who is responsible for what, how much obligation is carried by whom, how to measure the performance of third-party fiduciaries, and other details.
But coordination among stakeholders has emerged as the more crucial risk management issue as EBPs, particularly defined contribution retirement plans and health and welfare plans, increased in size and complexity.
Designed by ERISA Experts
In the mid-2010s, consultants at Roland|Criss created the 4D Framework. The model is still one of the best instruments for operations and risk alignment and has been utilized extensively by EBP sponsors since its launch.
The Roland|Criss 4D Framework contends that employing just any vendor that
claims to be a co-fiduciary is insufficient for successful EBP management and risk mitigation. The model lays out the four interrelated disciplines of Governance, Administration, Investments, and Controls essential to attaining effectiveness in any retirement, pension, or health and welfare plan. Among these components, Governance, Administration, and Investments form the hard Ds, while Controls represents the soft D.
Elements of the 4D Framework
The 4D Framework, in its most basic form, provides an operations and risk management approach for committees that oversee employee benefit plans, including retirement, investment, and healthcare plans. The Framework shows the board of directors, plan managers, and federal regulators how fiduciaries fulfill their obligation to put plan participants’ interests first in decision-making.
The Framework embraces the following disciplines:
The term “governance” describes the chain of command or hierarchy that designates roles and accountability. Employers typically exercise control over their plans through their EBP committees. The governance structure of an EBP is more visible than the other components. It is subject to change, which could negatively impact the other components if their coordination is not maintained.
Administration
An effective administration model considers the internal and external environments to ensure an employer’s ERISA-qualified EBPs are responsive to changes in either. External forces that an organization must consider in its administration model are vendors, participants, and the government. Administration is a discipline that requires thoughtful planning, ongoing assessment, and adjustment in order for an employer to sponsor a sustainable program. The administration model should support the enterprise’s mission, vision, and values.
Investments
Members of retirement and pension plan committees bear responsibility for their plans’ investment policy, implementation of investment strategies, selection of investment managers, monitoring each manager’s performance, changing managers as appropriate, and reviewing investment reports. Whether the committee hires an independent financial consultant to assist with those duties or goes it alone, ERISA requires plan fiduciaries to adhere to a formal decision-making process. The Roland|Criss 4D Framework is the set of procedures, methods, and activities that conform to that standard of care.
Controls
The 4D Framework contains internal controls to prevent errors and irregularities, identify problems, and ensure corrective action. Areas of vulnerability include in-house operations, fees charged by EBP vendors, internal and external data security threats, and regulatory complexities.
How We Implement the 4D Framework
The Roland|Criss 4D Framework helps employers analyze their EBPs for operations and risk management gaps. This model identifies misalignments between how an EBP and its vendors work and how to achieve better performance and reduce the employer’s legal risk.
A crucial part of the 4D Framework’s process improvement capability is a review of an EBP’s existing decision-making approach. A review helps preserve an employer’s culture-dependent practices and risk tolerance parameters.
Step 2: Reexamine the Operations Blueprint
This step involves significant research and consultation since ERISA-specific management templates are generally lacking. At this stage, we confirm the employer’s EBP goals, objectives, and resources in order to help it fulfill its culture strategy.
Step 3: Determine the Necessary Realignments
Identify any gaps or misalignments that would make it difficult for an EBP to achieve its objectives safely. An uneven distribution of resources or a lack of resources and expertise can account for such gaps. The Framework assigns timelines and responsibilities to the action plan. That makes it easier to decide who should be responsible for the outcomes and establish priorities to meet the deadlines.
Step 4: Upgrade the Decision-Making Process
The successful impact of the 4D Framework depends on the people involved in implementing the action plan. Roland|Criss augments a committee’s need for fresh expertise in operations management, investment oversight, or cybersecurity.
Step 5: Review Regularly
To stay updated with changes in the service provider and regulatory environments, it is imperative to frequently assess the four disciplines and their alignments and take corrective action. For example, artificial intelligence can eliminate worry about vendors’ cybersecurity and automate specific procedures.
When is the 4D Framework Applicable?
The process of analyzing the status of an EBP’s decision-making model is worthwhile in itself. But for it to be truly effective, employers must also determine the desired future state for each factor, thus ensuring the appropriateness of changes and improving performance so that all four disciplines align across stakeholder categories.
The Roland|Criss 4D Framework is applicable in the following scenarios:
- where vendor monitoring by a fee neutral source is lacking;
- when service providers dominate EBP committee meetings;
- the presence of recurring payroll errors related to employee contributions and covered compensation;
- if committee and human resources staff turnover is recent;
- where cybersecurity capability for tracking vendors and their subcontractors is absent; and
- when possible effects of future changes are unexamined or unknown.
For employers and their human resources executives struggling to manage the complexities of ERISA-qualified EBPs, the Roland|Criss 4D Framework can effectively streamline oversight, clarify and mitigate fiduciary risk, substantiate a committee’s conformance to ERISA, improve vendor relations, and ensure the best outcomes for plan participants.
Featured Capabilities
- In the ERISA retirement plan arena our independent plan administrator teams quickly identify opportunities for improvement in plan operations, vendor relations, and committee practices. In our capacity as an ERISA section 3(16) plan administrator we tailor the 4D Framework’s parameters for each client, implement controls, and monitor the entire plan complex under direct interaction with human resources and the plan committee.
- We help group and self-funded healthcare plan sponsors operate in full alignment with ERISA and the Consolidated Appropriations Act (“CAA”). We serve clients as an ERISA fiduciary.
- Our cybersecurity tracking technology validates vendors’ data security capabilities in real time. We use the Employee Benefits Security Administration (“EBSA”) guidelines and the NIST’s cybersecurity framework in our assessments to produce a security score. The score is a useful predictor of a cyber breach.
