RFP & Vendor Search

While Rule 408(b)(2) requires that all covered service providers disclose information including all fees and compensation, some are making it very difficult for plan sponsors to fulfill their responsibilities under the amended rule. For details see here.

If you have a service provider that is non-compliant or has unreasonable fees, Rule 408(b)(2) is clear that, the plan sponsor must begin the process of replacing that service provider as expeditiously as possible.

Prudent Champion, Inc. can conduct an unbiased search for a high quality, fiduciarily sound service provider including those that can minimize or alleviate your potential fiduciary liability. Most fiduciaries, whether they are retirement plan sponsors, endowment trustees or non-profit board members, are not aware that ERISA and most State Fiduciary Regulations permits them to delegate nearly all of their fiduciary risk to an:

ERISA Section 3(21) Named Fiduciary – The 3(21) fiduciary is the chief decision maker of a plan. While this duty is typically assigned to a CFO or HR Director, ERISA allows a plan sponsor to delegate these responsibilities to a professional independent fiduciary.

ERISA 3(38) Investment Manager – The 3(38) fiduciary duties involve the plan’s investment options. These are often assigned to a “401(k) Committee” but ERISA permits a plan sponsor to delegate the selection, monitoring, and when prudent, replacement of investment options.

Registered Investment Advisors – While endowments, foundations and non-profits are typically not subject to ERISA, most State Fiduciary Regulations permit fiduciary delegation.

Multiple Employer Plan (MEP) – A MEP is a 401(k) plan involving two or more unrelated companies. Plan sponsors can “join” a MEP and thereby delegate 100% of their fiduciary responsibility, and therefore all of their potential liability.

CAUTION: Not all 3(21)s or 3(38)s are created equal. Some service providers talk like a fiduciary and even walk like a fiduciary, but in the fine print of their contract they eviscerate any true fiduciary responsibility. Scott Simon describes them as Phantom Fiduciaries and notes, “They get to throw around the word “fiduciary”–without being on the hook for any real fiduciary responsibility (and therefore liability) to plan fiduciaries.”

It’s also the case that not all MEPs are created equal. While joining a MEP alleviates a plan sponsor of all of their potential fiduciary liability, the process of choosing a MEP is a fiduciary decision!

For more on choosing an advisor see here.