PLANSPONSOR - August/September 2019 - 29

Ted Schmelzle
Kent Peterson
That's a captive audience that can be easy to persuade. If a
provider's recordkeeping is relying on fees from IRA rollovers,
then it's not self-sustaining, and that has implications both
for the plan participants and the people that buy the IRAs.
If the recordkeeping services are priced too low, that means
recordkeeping expenses are being embedded in the cost of
the IRAs. That's important to know, because a plan sponsor
owes the same fiduciary duty to every participant-whether
they're active employees with assets in the plan, or people that
have left the company and taken their assets with them. The
Department of Labor says that it's a sponsor's duty to protect
against any service that is priced too high.
PS: You mentioned that sponsors and advisers have
been forced to make up for reduced service levels. How
does that come about?
Schmelzle: Recordkeepers are calling their services more efficient,
or streamlined, but that may be a kind way of saying
" less service. " For the sponsors, the recordkeeper may not have
dedicated account or relationship managers they can call and
talk to. Another point is the intake of participant data, and the
effort to ensure it's suitable-does the recordkeeper just load
it in their system as is, or do they work with the sponsor to
ensure it's as good as can be? That point might seem like it's in
the weeds, but everything depends on clean data.
For the participants, straight-through processing may be efficient,
but does it take out all the human interaction, and lose
some of the important protections on the security side? Does
the recordkeeper have customer service representatives that
have sufficient experience and acumen, and are dedicated to
retirement plans? Let's face it-we're in a business where the
details matter.
All this can mean extra work for the sponsor's staff, which
eats up the savings in the recordkeeping fees. Very large plans
already have HR and legal teams dedicated to these kinds of
things, but in many instances this most acutely affects smaller
sponsors that can least afford it. They're looking for the
administrator to take work off their plates, only to find that it's
coming right back to them.
Peterson: In view of the burden that lower quality service can
place on sponsors, the recordkeeping service with the lowest
cost may not be the most prudent choice.
PS: What other strategies can help sponsors lower their
plan costs?
SPONSORED SECTION
Schmelzle: Thinking of plans overall, encouraging retiring
employees to leave their assets in the plan can be helpful
in lowering costs, and at the same time providing better
retirement outcomes. In many instances that's a win for
everyone. The participants win, because they get institutional
pricing on their investments, and flexibility in choosing what
investment and income products they need. The sponsors win,
because they can achieve greater scale and buying power. The
recordkeeper wins too, whether they base their fees on assets
or participant count.
Peterson: Just one more thought to emphasize-understanding
the whole recordkeeping picture can call for a lot of
extra research for plan sponsors and their advisers, and they
may have to dig to discover any possible subsidies, conflicts,
and imbalances built into recordkeepers' business models. But
plan sponsors deserve, and need, to know exactly what they
are paying, and the true cost of that service.
Securian Financial has been offering consultative retirement plan solutions
to help employees achieve retirement readiness since 1930. Our
innovative, fiduciary-friendly approach includes lowest cost share
classes, extensive administrative outsourcing and exceptional service
provided by long-tenured retirement plan specialists. Bundled and
unbundled service platforms are available to clients of all sizes.
These materials are for informational and educational purposes only and
are not designed, or intended, to be applicable to any person's individual
circumstances. It should not be considered investment advice, nor
does it constitute a recommendation that anyone engage in (or refrain
from) a particular course of action. Securian Financial Group, and its
affiliates, have a financial interest in the sale of its products.
Securian Financial's qualified retirement plan products are offered
through a group variable annuity contract issued by Minnesota Life
Insurance Company.
Securian Financial is the marketing name for Securian Financial Group,
Inc., and its affiliates. Minnesota Life Insurance Company is an affiliate
of Securian Financial Group, Inc.
DOFU: 9-2019
918725
PLANSPONSOR - August/September 2019

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