What if there was a method by which your plan sponsor could shield themselves from fiduciary obligations and liabilities imposed upon them by, among other entities, the Department of Labor?
They can. And you might want to inform them it's possible to achieve the objective of reduced liability and expenses in several ways.
The first way is to take advantage of the possibilities that can be unearthed in reading ERISA or by working with an attorney who specializes in qualified retirement plans.
In ERISA section 3(21), the plan sponsor has the ability to shift the enormous responsibility of conducting due diligence, monitoring plan expenses to insure they are both fair and reasonable to say nothing of providing participants with sufficient education to allow them to make informed choices to a named fiduciary.
And that named fiduciary, as defined in ERISA Section 3(21) could be you.
If your plan sponsor wishes to divest themselves completely from the time-consuming task of monitoring your role as named fiduciary, they are able to do that as well. Section 413(c) of the Infernal Revenue Code allows for your plan sponsors to combine their stand alone plans into a single plan, otherwise known as a MEP.
A MEP has but one plan sponsor that bears the brunt of the fiscal and fiduciary liability inherent in maintaining a qualified retirement plan. And, as previously mentioned, that primary plan sponsor can shift those responsibilities to the named fiduciary under ERISA section 3(21) otherwise known as you.
What would be, besides the obvious fiduciary concerns, the benefit to consolidating a series of qualified plans into one multiple employer plan? Lower costs would be one benefit. The typical named fiduciary in a MEP is not transaction compensated and therefore not (solely) dependent upon commissions, like 12-b-1 fees for their compensation.
Greater diversification would be another benefit. Instead of concentrating on the well-advertised named investment companies, in a MEP, the named fiduciary can select from a wider range of investment options, from the less actively managed funds to alternative investments.
And small or start up plans would benefit by inclusion in a MEP as their (normally) high operational costs given their (comparatively) micro plan assets would be able to avail themselves of both the pricing and the available investment options normally only accessible by the larger plans.
One other thought to consider: by designating a named fiduciary as defined by ERISA Sections 3(21 and 38) wrapped inside the MEP structure, the primary plan sponsor provides a cost efficient process to delivering outcome based services to plan participants affordably. And, reduces measureably the risk to other plan sponsors within the MEP.
So, what if ... you approached your plan sponsors (or prospects) about the prudent possibilities of joining together to transform themselves into a MEP with you as the named fiduciary?
