PSNC 2018: Developments in Participant Advice

From the recent fiduciary rule hold to modern, advanced technology, panelists examine how participant advice has widely grown in the past years.

Given the recent 5th U.S. Circuit Court of Appeals decision to vacate the fiduciary rule, industry professionals on a panel during the second day of the 2018 PLANSPONSOR National Conference (PSNC) reviewed changes plan sponsors should keep an eye on.


Paul Sommerstand, senior Employee Retirement Income Security Act (ERISA) consultant at Blue Prairie Group, warned plan sponsors to stay cognizant towards their recordkeepers’ connection as a fiduciary. “Be aware, as a sponsor, ask recordkeepers where they are being a fiduciary,” he said. “Ask if contracts and agreements will change. That is something to be clear on, as this is a fluid environment.”


Leah Hill, partner at Shepherd Financial, reiterated this sentiment, emphasizing on the severe implications behind the court’s verdict. “The biggest takeaway for myself is that this is something important, so many assets are at stake,” she said. “It’s not something that is going away or that will be taken lightly. People do care and want these assets and the advice to be taken seriously.”


In response to the court’s decision, the Department of Labor (DOL) issued Field Assistance Bulletin (FAB) 2018-02, announcing a temporary enforcement policy, “defining who is a ‘fiduciary’ under ERISA and the Internal Revenue Code of 1986 (IRC), and the associated prohibited transaction exemptions, including the Best Interest Contract Exemption (BIC Exemption), the Class Exemption for Principal Transactions In Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs (Principal Transactions Exemption), and certain amended prohibited transaction exemptions (collectively PTEs).”


Because of heightened fears among financial institutions, advisers, and retirement investors, the DOL determined financial institutions must comply with the temporary enforcement policy, until additional guidance is released.


Whereas advisers must be wary of violating prohibited transactions rule, most concerns from plan sponsors depends on the adviser, says Sommerstand. “Most plan sponsors that we’ve partnered with are looking to help the employees,” he said.


According to Sommerstand, qualities plan sponsors search for in advisers include assistance with Social Security, extensive experience in the field, and a passion in helping participants achieve their retirement savings goals. Similar to how plan sponsors need advisers to increase participant savings, advisers assess an employer’s drive towards their workers’ future, mentioned Hill.


“The best part of my experience depends on the plan sponsor,” she said. “When they take to really promote and pass something on site, care for employees, I think workers really resonate with that.”


A subtopic throughout the fiduciary landscape is the role of mobile technology, and its effect compared to one-on-one, personalized advice. In an era of technological advancements, human interface continues to extensively impact society, said Hill. Whereas robo advisers, web features and app updates seem to govern communications, it’s the basic form of engagement—social interaction—that appeals to a participants’ basic needs.  


“We live in an age of technology. As we continue to advance, we’re realizing that we still need each other,” she said. “People still need people and that everyday interaction. Those words and feelings can never be discounted.”


Yet, this doesn’t mean that plan sponsors cannot use technology to their—and their participants—advantage. Live webinars, emails, and even swift website chat messages can help those employees searching for quick and reliable solutions. It’s up to the plan sponsor, then, to implement these features, and utilize its greater good for the participants’ wellbeing.


“Especially for certain demos, this works very well. However, technology is only as good as you use it…” Hill said. “What we would [do], is take our calculators and then print out a one-page report and put it in the hands of workers.”