Why You’re Ready for the 401(k) Plan of the Future

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Too few plan sponsors understand the service hierarchy surrounding 401(k) plans, let alone the responsibilities of each servicer.

Do you know who is responsible for what in your plan? Chances are, you don’t.

In the event of a compliance or liability issue, this lack of knowledge can cost you dearly.

Several years ago, the Department of Labor hired 1,100 more auditors to audit every qualified retirement plan in the United States by 2020.

In FY 2016, the Employee Benefits Security Administration, responsible for ensuring plan integrity in the U.S. closed 2,002 civil investigations and 67.7 percent resulted in fines on plan sponsors who, one could say, were not paying attention to their plans.

The average fine was $259,000. Could your P&L handle that?

We want to raise your awareness of who’s who in your 401(k) plan, and suggest an innovative alternative to you to sleep better at night. We worry about you sponsoring a plan with a false sense of security.

By default, you, the plan sponsor/employer is 100 percent responsible for your plan, especially its investments.

You hold the ultimate decision-making authority for those investments, their selection, monitoring, replacement or removal─with the freedom to accept or reject any recommendations.

trap 1If you are uncomfortable making your plan’s investment decisions, you have several choices. You can work with a non-fiduciary registered representative (a broker). You can work with a 3(21) fiduciary, like Roush Investment Group, also an Accredited Investment Fidicuary. Or you can work with a 3(38) investment manager.

Let’s quickly define our terms and spell out the main pros or cons of each role.

In general, fiduciaries hold the responsibility and duty to:

  • Operate the plan only in the interest of participants for the sole purpose of providing benefits
  • Act “prudently,” as in how a professional would perform under similar circumstances
  • Diversify the plan's investments to minimize risk of any large losses
  • Follow plan document terms written to govern the plan
  • Avoid conflicts of interest with the plan

Roush Investment Group is a different breed of 3(21) investment fiduciary. However, before I explain our difference, let me first explain the term 3(21) which defines our responsibilities under The Employee Retirement Income Security Act of 1974 (ERISA) in § 3(21). A quick review in layman’s terms.

The 3(21) Fiduciary

As your 3(21) investment fiduciary, a fee-paid professional, we advise and provide investment recommendations to our clients, the plan sponsors. A 3(21) fiduciary advisor gives direct guidance and recommendations to each participant on his or her investment selections.

The plan sponsor retains the consequent decision-making authority for the investments, and may accept or reject the recommendations. We share fiduciary responsibility with you, and we assist in writing the investment policy statement (IPS), the governing document which is the foundation of the process.

As plan sponsor, you also must decide who executes the investment decisions for the plan or select your 3(38) investment manager, the primary point of today’s post.

The 3(38) Fiduciary

ERISA Section 3(38) defines the investment manager as a special type of fiduciary, specifically appointed with full discretionary authority and control to decide on actual investments, subject to plan document terms and the IPS. The manager may select, monitor, remove and replace the investment options offered under the plan.

The 3(38) must be a registered investment adviser, bank or insurance company, and must acknowledge its fiduciary status in writing. Service agreements must carefully drafted to provide for the appointment.

Advantages of a 3(38) on Your Plan

The powerful draw of a 3(38) fiduciary, if properly appointed─plan sponsors are relieved of fiduciary responsibility for the investment decisions made by the investment manager. The 3(38) fiduciary assumes even greater liability than a 3(21).

While still responsible to monitor the investment manager’s proper performance of services, you do not need to worry about or second-guess investments. Now you have an extra layer of protection.

Every plan sponsor needs a 3(38)-investment manager to mitigate risk and liability.

Your brokerage firm, investment advisor, insurance agent, or financial planner cannot reduce your liability because they offer no process for continuous monitoring of the responsible parties in the hierarchy. And yet, you pay for services. In fact, benchmarking is all they can offer; however, then you are compelled to take that knowledge and execute or not.

What’s more, they only bind themselves by the lesser “suitability” standard of care, not the “accountability” of fiduciaries bound to do only what is in the sole interest of the client.

What if you could find a golden referral to a 3(38) investment manager?
What if you could access a failsafe process to bring down your plan liability?
What if you could tuck the responsibility hierarchy under one umbrella without monitoring everyone?
The good news? Every Roush client will soon benefit from the maximum protection that the law allows as we transition to the 401(k) plan of the future─our breakthrough DCPro process.

DCPro─Eliminate the Burden. Optimize the Benefit

Earlier I referred to Roush Investment Group as a different breed of 3(21) fiduciary. And here’s why.

We are pleased to introduce an innovative process, called DCPro, to surround your plan with the ultimate shield of protection. Roush Investment Group identified and appointed industry-leading fiduciary experts to collaborate and manage your plan in your best interest.

DCPro delivers the expertise of a 3(16) plan administrator, a 3(21) fiduciary advisor, and a 3(38) investment manager in one powerful collaboration, each driven to limit your liability exposure.

As your 3(21) fiduciary, Roush Investment Group helps you monitor all servicers to your plan through the latest software and technology platforms. Think of us as your sentinel on watch, your plan’s own security system.

Now, you do not need to be an expert fiduciary or search for the right 3(38) investment manager. Or worry about the compliance readiness of your plan.

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We’ve removed the burden of 401(k) operations from your back office to ours. And provided a named fiduciary to relieve you of fiduciary responsibility to the maximum extent permissible by law.

You are virtually free of compliance threats, No more time-consuming responsibilities, And at a market competitive cost.

Make a Wise Choice

Instead of struggling to piece together a team of independent fiduciaries yourself, who may or may not work well together, take advantage of the seamless structure of DCPro.

We’ve already done all the work for you.

Even if you’re not ready for our solution, we strongly urge you to upgrade the fiduciary protection on your plan by engaging a proven 3(38) investment manager for all the reasons we’ve discussed in this post.

Don’t be caught off-guard by regulators. Make the wise choice to protect yourself now.

If we can be of service, please contact me below.

erin cathcart

Erin Cathcart

Roush Investment Group

O: 559.579.1490 F: (559) 490-2015 C: 559.907.6647