To say that a retirement plan sponsor must take fiduciary obligations seriously is to state the obvious. Here’s the thing though: we can’t stop at mere compliance. Longer lives and higher costs of living make the work of sponsoring a thriving retirement plan ever more important. Read on for practical advice about going the extra mile.
Compliance and Stewardship
Retiring successfully has a price tag, and it’s going up, which makes company sponsored retirement plans an ever more desired benefit for workers. However, if plan fees go unchecked, the services offered are irrelevant, and engagement is low, it’s unlikely that retirement plans will achieve the ultimate outcome: more successful older ages for more people. At the end of the day, as Groom Law Group reminds us: “Being a fiduciary is about more than just avoiding lawsuits—it is about improving participant outcomes.” Building on this, ERISA expert Eric Dyson encourages plan sponsors to think beyond compliance, and see themselves as stewards of thriving retirement plans:
Fiduciary obligations are critical—they’re the foundation of the house. Without them, everything crumbles. But if all you do is meet your legal duties, the house you’re building may still sit empty, unused, and unhelpful. The same can be true for a workplace defined contribution plan.
For example, a fiduciary committee might run a compliant plan: plan documents are up to date, fees are monitored, and investments are regularly reviewed. But if participants don’t contribute, or if their contributions are too small to build meaningful retirement savings, the plan achieves no results. This is like a house with walls but no plumbing or electricity—technically complete but not functional.Good stewardship ensures that the house isn’t just built; it becomes a place where people can thrive.
One critical change that can make a tremendous difference in retirement plan outcomes is reducing participant costs, and toward that end, Dyson encourages: “Explore whether the company can pay for plan expenses instead of participants. As much as possible, have third-party service provider expenses paid via a billable invoice to the employer.” Dyson also underscores prioritizing participant outcomes by asking,“How does this decision improve participant readiness for retirement?” whenever exploring plan choices, options or shifts. Other examples of actively stewarding a retirement plan, according to Dyson, include:
- Focus on Outcomes: Like plumbing ensures clean water flows, stewardship ensures participants achieve retirement readiness. Ask yourself, “Are we designing our plan to help participants succeed, or just to comply with the rules?”
- Advocacy: Stewardship requires advocating for meaningful changes—such as increasing employer contributions or absorbing plan fees. These decisions are like upgrading the electrical system: they may cost more upfront, but the goal and the focus are for long-term success.
- Participant-Centric Decisions: Every decision you make as a fiduciary should prioritize participants’ best interests. Imagine choosing between cheaper siding or better insulation for a house. While it may be a competing decision, you should pick the option that protects its occupants, not just the one that saves money. Saving money is a good thing, but integrity and security are the prime concern in this simple example.
Obligations and Care Too
It is usually pretty easy to see how, at their roots, compliance imperatives for plan sponsors are directly aimed at helping more participants experience thriving retirements. For example, missing participants, a big problem in the eyes of the Department of Labor (DOL), are losing out on dollars that could make a tangible difference in their lives. Accordingly, plan sponsors retain fiduciary responsibility for communicating with missing participants, and the DOL’s guidance on missing participants provides detailed instructions for plan sponsors to follow in an effort to curtail the problem.
As a retirement plan sponsor, your work can make a substantial difference in the lives of employees–and their beneficiaries. Unfortunately, unforeseen challenges arise all the time, and seemingly small oversights are known to trigger costly investigations, audits and even lawsuits. The average ERISA claim costs businesses over $1.2 million in legal fees. The good news? You don’t have to shoulder all your risks alone: Colonial Surety Company makes Fiduciary Liability Insurance affordable for every plan sponsor. With this protection, for a few dollars a day, you’ll have coverage for defense costs and penalty limits up to $1,000,000 if faced with alleged or actual breaches of duty in connection with the employee retirement plan. Cyber Liability coverage is included at no extra cost, providing additional protection against regulatory actions related to data and privacy, as well as expert response services in the event of a cybersecurity breach. You can easily add our Fiduciary+Cyber Liability Insurance to your ERISA Bond in minutes, today:
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