What risks does a fiduciary face, and how can that person mitigate those risks?
One of the biggest areas of risk is potential fiduciary liability. Most individuals who are plan fiduciaries do not realize that they can be held liable for losses to the plan.
The best way to demonstrate that those responsibilities have been carried out is by properly documenting processes. It’s important to conduct ongoing due diligence that ensures continuous monitoring, evaluation of administrative fees and the overall effectiveness of your plan in providing retirement benefits.
How can a fiduciary create strong relationships with plan providers?
Designing an effective retirement plan can be a daunting task. Plan sponsors are often confronted with complicated rules, an overwhelming array of choices, and the requirement to evaluate and understand plan costs.
Employers with plans of all sizes need someone who can offer objective knowledge and support to help make informed decisions on how to structure a competitive, cost-effective retirement plan.
A good partner should help minimize fiduciary burdens and liability that the plan sponsor may incur, as named fiduciary, by using a documented process for reviewing asset options. The partner should also use innovative approaches to plan design, recordkeeping and administration.
In addition, partners can help when new laws and legislation are enacted, which can have a widespread impact on a plan and its participants. Fiduciaries need to ensure that they are working with a person who can help them make educated, rational decisions in response to these changes.
How can a plan sponsor, as named fiduciary, communicate with plan participants and create relationships with them?
Reaching out to the employees participating in the plan is not always easy, and a plan sponsor needs help so that employees may achieve their retirement dreams. The employer should work to develop and implement a comprehensive education and communication plan. This education program should offer dynamic and engaging content in the form and time frame that the employees desire.
A fiduciary should also provide participants with tools to help achieve retirement readiness by offering options to help build their portfolios and prepare for the future. Plan participants often lack the knowledge and may fail to proactively manage their accounts. A solution endorsed by the recent Pension Protection Act is the utilization of a managed account solution.
By uniquely blending these approaches with personalized plan data and leading industry knowledge, a managed account program can create risk-controlled, competently designed retirement solutions, which can help optimize plan outcomes for both the plan sponsors and plan participants.
Stephanie M. Spaccarelli is vice president and regional managing director at Fifth Third Bank. Reach her at (513) 534-0696 or [email protected].
