As retirement plan sponsors try to outsource more of their fiduciary duties, advisers ought to stay on top of the agreements providers draft when offering their services.
The latest flavor of fiduciary services — called 3(16) services — allow plan sponsors to outsource plan administration duties to other entities, typically a third-party administrator. Those duties range from overseeing plan distributions and loans to ensuring elective deferrals are made in a timely manner.
Advisers can help plan sponsors check out potential providers of 3(16) services, but those who aren’t fiduciaries ought to ensure that they aren’t providing legal advice to the employer.
“When you deal with the terms of the agreement, you might help plan sponsors decide what terms are important to them,” said Kimberly Shaw Elliott, partner at Baugh Dalton Carlson & Ryan. “But as far as interpreting or drafting an agreement, you should refer to an attorney.”
Nevertheless, even advisers acting in a nonfiduciary capacity can help plan sponsor clients by being aware of the services in the marketplace and benchmarking fees, she added.
Ms. Shaw listed 10 key provisions that should be included a well-crafted service agreement for 3(16) services.
By Darla Mercado