PLANSPONSOR - August - September 2022 - 19

PROVIDER RELATIONSHIPS |COVER STORY
A Focus on Participants
Advisers can also help organize and align plan objectives, Pathe
says. " It could be a good time to solicit help from an adviser when
concerns arise as to whether the plan is effectively preparing
employees for retirement, and whether there's enough education
and communication with employees, " she says.
For example, a large retailer recently hired Segal to help the
company determine why it had trouble increasing participation
beyond 30%. So, Reed and his team went to drill deeper into
participant demographics. The process confirmed that, while
the average looked OK, store personnel were failing to engage.
Reed used data his team collected to help the employer
create a road map and implement changes focused specifically on
increasing engagement and participation among store personnel.
" The most important components, in my opinion, that plan
advisers offer now are the fiduciary education and the participant
experience and participant engagement, " Reed says.
is a fiduciary act, Kohn says, and one the
sponsor should conduct thoughtfully.
Fiduciary services vary by adviser
firm, and many plan sponsors misunderstand
both their own and advisers' fiduciary
duties. The type of fiduciary adviser
a plan sponsor hires affects the work and
responsibility that remain with the plan
sponsor and the company.
Here is a look at the types of fiduciaries
that plans commonly use:
3(21) fiduciary. An adviser acting as a
3(21) fiduciary provides investment guidance
and recommendations to the plan
sponsor, but the sponsor makes the ultimate
decision as to whether to change the
investment lineup.
" The 3(21) does everything for the
plan except make the final decision, "
Kohn says.
Because the sponsor has the final say,
it also assumes the fiduciary responsibility
for that decision, though it can document
the process that included guidance from a
professional adviser.
3(38) fiduciary. The adviser who acts as
an investment manager 3(38) fiduciary also
provides guidance and recommendations,
Assistance With Benchmarking
Another important task that sponsors often seek an adviser's
help with is benchmarking their plan.
" Advisers are asked, or should be asked, to evaluate products
and services and costs, " Reed says. " All benchmarking is
very important. "
For example, an adviser could walk her client through pertinent
third-party survey data such as those published by the Plan
Sponsor Council of America, Vanguard or Fidelity.
That said, advisers can also explain the value of a particular
product or provider in relation to the expense.
" I'm a big stickler for 'cheapest doesn't mean best,' " Reed
says. " One adviser may be cheaper than the other, or one recordkeeper
may be cheaper than the other, but they might not be
providing all the same services. So you want to look at an applesto-apples
comparison. "
Besides comparing fees, advisers can show the sponsor how
but makes the final decision on investments.
This typically costs more and
reduces the plan sponsor's involvement.
" The 3(38) is a deeper level of fiduciary
outsourcing and a deeper level of
fiduciary protection, " Kohn says. " [It] has
the discretionary authority to make the
recommendation, vet the recommendation
and implement the change. "
3(16) fiduciary. A 3(16) handles the
administration of the plan, making sure
it remains in compliance with all relevant
ERISA rules.
Among sponsors that use a plan
adviser, nearly 60% work with either a 3(21)
or a 3(38) fiduciary, according to research
from Dimensional Fund Advisors data.
Sometimes, plan sponsors begin
working with a plan adviser as a 3(21) and
later transition to a 3(38) relationship, Kohn
says. If the sponsor is hiring a plan adviser
to also work with participants one-on-one,
it may want to ask whether the adviser will
act as a fiduciary in that capacity, meaning
he will put the interest of the participant
ahead of his own when making investment
recommendations.
Plan sponsors should keep in mind
that, no matter what type of fiduciary
they hire, the sponsor typically remains a
named fiduciary on the plan, accountable
to monitor and benchmark its adviser, as
well as other providers, including recordkeepers,
trustees, providers of education,
etc., says Kathleen Roche of Ascensus.
" Sometimes, plan sponsors will hire
an adviser thinking they are done, but that
couldn't be further from the truth, " says
Robin Credico of WTW. " They can never
100% eliminate their fiduciary responsibility,
because they're judged on the
fact that they hired the 3(38) investment
manager to do the investment services. It's
always your job to monitor the adviser. "
Besides
reviewing
the
adviser's
performance, monitoring the individual
also requires watching for unreasonable
fee increases and for conflicts of interest.
" Plan sponsors should review the
services on a periodic
adviser's
basis
to ensure the [person] is delivering
value based on the unique needs of the
company, " Roche says.
" Peer-to-peer feedback is another
way to gauge if an adviser is measuring
up-sponsors should feel comfortable
asking for references to get a sense for
how the
adviser performs for
clients, " she says. -BB
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