By Kyle Louvar, CFP®, AIF®
Providing an attractive retirement plan for your employees is a great way to establish a supportive company culture, retain talented people, and help your employees build financial security for their futures. But companies take on significant responsibilities when offering this type of benefit to employees. What many employers don’t realize is that they have a fiduciary duty to act in the best interest of their employees—even if the retirement plan is outsourced to a third party.
This means as an employer it’s crucial to understand your role as plan sponsor. Keep in mind, employee lawsuits involving claims of charging excessive fees or mismanaging assets have been increasing in recent years. (1) Fortunately, there are several actions you can take to improve the outcomes for your plan participants and mitigate any potential liabilities.
4 Roles of Retirement Plan Management
Retirement plan management can be confusing if you don’t first understand who is managing what. There are four major roles involved in typical retirement plan management:
- Third-party administrator (TPA): This is a third-party organization that manages the day-to-day administrative aspects of the plan, including preparing employee benefit statements and maintaining IRS compliance.
- Recordkeeper: As the plan’s bookkeeper, this person keeps track of which employees are enrolled in the plan, what investments they own, and how much money is moving in and out of the plan.
- Payroll provider: This is a third-party company that helps process and administer payroll and employee taxes. Retirement plans can be integrated with payroll providers to reduce processing on the employer’s end.
- Financial advisor: The financial advisor may act as a fiduciary consultant or investment manager and provide employee education.
Most companies have the first three roles covered, but the financial advisor role is often forgotten or overlooked. Some employers incorrectly assume that their fiduciary responsibilities will be covered by the TPA, but this is not the case. Financial advisors can help minimize the fiduciary liability that comes with offering employer-sponsored retirement plans.
Your Role As an Employer
As an employer, you are legally responsible for evaluating the performance of your plan investments every quarter. Additionally, you may be required to appoint a committee and must maintain documentation to prove compliance. State labor departments will occasionally conduct surprise audits, which can leave you scrambling to produce documentation on short notice. Contrary to common perception, TPAs and recordkeepers do not manage any of this!
If you’re like many of our clients, you may not realize the extent of your responsibilities when you initially set up a retirement plan for your employees. Over time, this can leave you vulnerable to fiduciary liability since employees have the right to sue you if you offer poorly performing funds within the retirement plan investment options.
Partner With a Professional
The good news is that you don’t have to manage these responsibilities alone. At Guided Capital Wealth Management, we are fiduciaries who can manage this responsibility on your behalf.
We can serve as either a 3(21) fiduciary—recommending and monitoring investment funds in your plan as a co-fiduciary but not assuming discretion—or a 3(38) fiduciary—recommending, monitoring, and replacing investments in the portfolio as a fiduciary investment manager assuming full discretion.
We utilize a fiduciary process and tracking software that automatically benchmarks the performance of all investments to your Investment Policy Statement and produces the information required for reporting. As a Registered Investment Advisor (RIA), we are completely unbiased throughout the whole process. We are not beholden to any third-party providers or fund managers, thus minimizing your exposure to fiduciary liability.
Get Started Today
If you’re starting an employee retirement plan, want to amend your current management setup, or you’re looking for financial peace of mind when it comes to your plan investments, download the Paradigm Formula (k) PDF to learn more about our process. We’ll handle the ins and outs of retirement plan management so you don’t have to. Contact us at (832) 975-0711 or by email at info@guidedcapitalwealth.com to get started today.
About Kyle
Kyle Louvar is the CEO and Wealth Management Advisor for Guided Capital Wealth Management, a fiduciary financial advisory firm offering fee-based advice, guidance, and education. After seeing the impact that the 2008 financial crisis had on families, Kyle became fully committed to helping his clients develop a financial plan that changes as their lives unfold and their needs evolve. Spending nine years working for one of the largest brokerage firms on Wall Street, Kyle holds a high value for process, expertise, objective advice, and customized solutions. His goal is to help his clients experience confidence in their financial future through a disciplined process of financial planning, investment management, and sound financial decision-making.
Kyle graduated from New Mexico State University, where he was a proud 4-year letterman in football for the Aggies and where he’s sat as a board member since 2015. Kyle holds the CERTIFIED FINANCIAL PLANNER™ and Accredited Investment Fiduciary® (AIF®) certifications. When not helping his clients, Kyle enjoys spending time with his wife, Nicole, and their two daughters. You can often find him coaching his daughters’ softball teams, playing golf, cooking, and traveling. To learn more about Kyle, connect with him on LinkedIn.
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