By some measures, 403(b) plan sponsors have had to absorb a quarter century worth of change in just a couple of years. Having scrambled to adjust to a newly invigorated regulatory regimen, many now are turning their attention to the next steps in plan design and fiduciary compliance. PLANSPONSOR recently spoke with Jeb Graham, Retirement Plan Consultant at Tampa, Florida-based CapTrust Advisors, about these trends.
PS: The past few years have brought significant change for 403(b) plan sponsors. How has that change affected plan sponsors?
Graham: Some 403(b) sponsors have achieved a fiduciary best practice standard, with well-organized committees, prudent due diligence of service providers, formal documentation of process, and so on. However, that number, as a percentage of the 403(b) plan sponsor universe, is not large.
PS: Where do things seem to stand now with regard to things like new regulatory requirements, plan document design, etc., in the 403(b) market? Have things pretty well settled out, or is there still a lot of change going on?
Graham: For sponsors new to ERISA requirements, getting past the first hurdle was a huge ordeal. From the standpoint of plan administration, most made it through the first 5500 filing. The next step is getting up the curve on overall fiduciary governance. The challenge on this front is the lack of a clearly defined penalty for not doing so. The world of fiduciary oversight is perhaps more ambiguous, as there is not a date by which compliance must be met or a document filed. Plan sponsors have a clear deadline for filing their 5500, with the known penalty for noncompliance. Compliance with fiduciary governance requirements such as investment due diligence and service and fee benchmarking is much more ambiguous, as are the penalties.
PS: What do you think has been the biggest change for 403(b) plan sponsors?
Graham: At a macro level, the overall organizational recognition of the plan sponsor’s role in oversight of the plan. In the past, the 403(b) often was delegated to a mid-level HR person, with very little allocation of resources or support. The regulatory changes forced the 403(b) up into the “C” level offices.
How has that changed the focus on these programs?
Graham: I think we are just beginning to see that change. The executives seem to be on board, at least with regard to the administration and compliance side. The investment side is a different matter. From the interaction I have had with plan sponsors new to ERISA, my sense is that many still don’t have any real investment oversight process in place.