Tip for August 2019
We’ve studied the effect that adoption of a regulatory risk management (“RRM”) system has on enterprises that sponsor ERISA plans.
The most effective benefit plan committees approach fiduciary risk based on the results sought, not derived from old methods with which they were most comfortable but are out of date.
Simply, the best fiduciary risk management designs originate backward from the outcomes sought.
There are two prevalent design approaches on which RRMs are constructed. We call them “Features Focused” and “Results Focused.” The former takes a passive approach, while the latter is a prudent proactive approach.
[table “31” not found /]Emerging results of plan designs appearing in lawsuits and regulators’ enforcement reports reveal the imprudence of the Features Focused approach.
- Little confidence that all employee benefit plan related risks such as timely transfer of payroll distributions, fees paid for plan services and investments, vendor monitoring, and actual risk events are captured, and their impact evaluated;
- Inability to manage and report operational and investment related risks in the language of the enterprises’s senior risk managers;
- Lack of bottom-up integration of risk practices with the enterprise’s risk system;
- Overestimation of the ability of fiduciary liability insurance to protect the enterprise and its responsible plan fiduciaries;
- Costly response to compliance and risk events and failure to quantify cost of employee benefit plan risk management; and
- Lack of adequate cybersecurity protection for critical financial and employee related information.
TIP
The employee benefit plan risk controls, specifically the internal standards for meeting ERISA’s fiduciary constraints, should be deduced from the results sought not driven by the providers of outsourced plan level services.
It’s never too late to upgrade your plan’s design to meet current fiduciary standards of care. Roland|Criss offers a cost effective proven assessment and upgrade program that does so.
Ask us about our Qualified Plan Review (the “QPR Rating™“).
QPR Rating™ is a trademark of Roland|Criss
