Is Your Plan Adviser Helping You with Compliance?

Retirement plan sponsors are usually not experts in compliance, while advisers and consultants are, so sponsors may want to rethink how they engage advisers.

“It is hard for [retirement plan] sponsors to keep a handle on all they have to do from a compliance standpoint,” says Nancy Gerrie, a partner at McDermott Will & Emery in Chicago.

“In my 25 years in the business, I have seen the number of duties for plan sponsors grow exponentially, particularly on the Department of Labor side and with investments. Even our most sophisticated clients have a hard time keeping up,” she tells PLANSPONSOR.

But, there is help for plan sponsors, if they know where to find it. For example, Gerrie’s firm went through numerous audit information request letters from the Department of Labor (DOL) and Internal Revenue Service (IRS) to see which issues each agency is auditing, and added up which retirement plan compliance issues seem to be cropping up the most. “We ranked them from most easily to least easily addressable and came up with internal controls our clients can use,” she says.

“It’s all a matter of good plan hygiene and governance,” Gerrie adds. “One would hope plan sponsors are having a once-a-year or more often review of their plan’s investment funds and other plan data. If not, they could be in breach of their fiduciary duty.” She says, at a minimum, the retirement plan’s adviser should be reviewing funds with the sponsor once a year, but, ideally more often. And she suggests, once a year would be a good time to review other things, such as plan document updates, the plan’s definition of compensation and how the plan sponsor is keeping track of loans and loan defaults, just to name a few. “We have developed a model calendar for plan sponsor committee meetings on a quarterly or semi-annual basis, which provides a laundry list of what they should be looking at.”

Gerrie also suggests that if the plan has greater than 100 participants and requires an annual financial audit, plan sponsors should sit down with that auditor and go through the report. “The auditor should be pulling samples and checking some of these same issues, and sponsors can review that and identify areas of weakness and address them,” she says.

NEXT: Getting help needed from advisers

In a typical advisory agreement, the retirement plan adviser isn’t given responsibility to make sure plan sponsors comply with all DOL and IRS regulations, notes Adam Pozek, a partner at DWC ERISA Consultants in Salem, New Hampshire. While some advisers’ service offering is based on ongoing counseling, on the other end, some advisers only provide investment help. It depends on the level at which sponsors engage an adviser, he says.

It doesn’t hurt for an adviser to send retirement plan sponsors compliance reminders, but that duty usually falls to the plan providers, Pozek adds. But, he says, one way an adviser can add value for plan sponsors is as a coordinator. “Advisers can get plan sponsors and recordkeepers or third-party administrators together to discuss who is responsible for what.”

Scott Liggett, JD, director of ERISA compliance, Lawing Financial, Inc. in Overland Park, Kansas, says some advisers do take on the role of reminding plan sponsors about compliance; his firm does. “It is helpful to have advisers send reminders or nudges about such things as the timing of testing, whether the plan sponsor has sent census data to the recordkeeper, reminders to have the Form 5500 filed on time to avoid penalties,” he states. “We are experts, plan sponsors, usually, are not.”

The trend now is more advisers are serving as Employee Retirement Income Security Act (ERISA) co-fiduciaries with plan sponsors, notes Liggett. But, the level at which plan sponsors are receptive to training and education will dictate an adviser’s level of involvement.