By Todd Hughes, J.D.
Vice President & Retirement Services Officer

As a busy business owner or executive, you are focused on growing your company and staying ahead of the competition; whether that is creating the next new product, improving efficiencies, or closing that big sale.  The one thing that many owners and executives aren’t spending enough time and due diligence on is their role as the company’s fiduciary for the 401(k) Plan.

With over $7 trillion dollars in Employer Sponsored Defined Contribution plans in the US, more attention should be paid to how these plans are being managed as there has been a dramatic increase in lawsuits against plan fiduciaries.  It is a very good use of time for a business owner or executive to review your retirement plan to ensure that you are providing the best benefit possible to your employees and to also reduce the potential for a lawsuit for breach of fiduciary duty.

The following are six simple questions to ask your Retirement Plan Advisor that will help determine whether or not you are at risk as a plan fiduciary:

  1. Are you serving in a fiduciary capacity? To protect yourself and ensure that your advisor is acting in your best interest, it is highly recommended that you work with an advisor who shares fiduciary duties with you. Usually this will be either a 3(21) co-fiduciary or a 3(38) investment manager.
  2. What is your fee? Your advisor should be charging a defined/fixed and transparent fee, for example, .30% of assets.
  3. What additional services are you providing? In addition to the necessity of your advisor serving in a fiduciary or co-fiduciary capacity, what other services are being provided? Participant education or record keeper monitoring?  Your advisor should be able to define the exact services being provided and the incremental costs associated therewith, if any.
  4. How are you paid? The fee charged by the advisor should be a defined flat fee based on total plan assets under management, and not based on the investment choices in the plan whereby the advisor is compensated by the funds (12(b)1 fees, shareholder services fees, NTF fees, etc.) used in the plan, creating a conflict of interest and a potential breach of fiduciary duty.
  5. How are the investments selected? Does your advisor and their firm have a disciplined quantitative and qualitative process for selecting the investments in the plan?  Do any of those investment choices benefit the plan or financial advisor?
  6. How many plans do you manage? Retirement plan advising is a specialty, as such, your advisor should have a substantial number of plans that they manage (At least 10).

In addition to being able to answer the questions above in the correct manner, the plan fiduciary must also be able to show that the fees being paid are reasonable and the services are necessary. High investment fees and plan administration fees are a precursor to a lawsuit.

To learn more about how Central Trust Company can provide the necessary independent benchmarking and for a no obligation review of your plan, please contact Todd Hughes at