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In a symposium on 403(b) issues hosted at St. Louis University and sponsored by Cooperating School Districts Business Services, Ed Hinders III, AIF, Vice President of Retirement Plan Services, CBIZ Financial Solutions, said these standards include acting in the best interest of participants, prudently selecting plan investments then monitoring those investments and changing them when necessary, ensuring fees are reasonable, and educating participants on plan and investment options. If you follow the first standard – acting in the best interest of participants – “the rest of these start to fall into place,” Hinders noted.
Hinders suggested plan sponsors establish a retirement plan committee and adopt an investment policy statement (IPS) which will be the fiduciary roadmap for the committee in selecting and monitoring plan investments. The committee should meet on a periodic basis and document the meetings and all decisions.
If sponsors need help, Hinders recommended engaging outside resources such as a registered investment adviser. They can help with evaluating all investment options, creating a diversified lineup of investment choices, and establishing a due diligence process to select, monitor and replace investment options.
In addition, there exists much proprietary research, market commentary, and information on “watch list” funds that sponsors can use in the investment selection and monitoring process, and advisers can lead them to it.
Hinders said it is also important for sponsors to become educated about fees, especially investment fees and revenue sharing arrangements. Sponsors should understand what they (and participants) are paying for.
Other fees to watch for, according to Hinders, include:
- Shareholder servicing,
- Sales loads & commissions,
- 12b1 fees,
- Brokerage fees,
- Surrender charges, and
- Individual participant service fees.
However, Hinders notes that it’s not just about getting the lowest fees. Providers with higher fees may be delivering higher value to the plan and participants. The key is reasonableness.
–Rebecca Moore