5 Ways Fiduciary Shield Helps Advisors Win 401(k) Plans

Fiduciary Shield by BidMoni launched in 2018 to support the fiduciary requirements of those managing employer sponsored retirement plans.  We are excited to launch our newest product feature – 401(k) Prospector.  Registering with Fiduciary Shield gives advisors access to unparalleled technology designed to support the full lifecycle of 401(k) plan management. From plan prospecting --> plan proposal --> plan onboarding --> plan monitoring – the tools you need to win more 401(k) plans are all here. 

401(k) Prospector 

We launched 401(k) Prospector this year as a tool to help advisors identify potential 401(k) business opportunities.  401(k) Prospector highlights all plans filing an annual Form 5500 within 10 miles of an advisor's office.  A national plan search can also be conducted by either the employer name or plan name.  Our database contains information on over 800,000 plans helping advisors identify important plan information such as total plan assets, total participants, and key plan contacts.  Plan contacts are even identified on LinkedIn, giving advisors another opportunity to connect. 

Retirement Plan Wellness Reports 

Retirement Plan Wellness Reports are designed to help advisors identify fiduciary risk factors through annual Form 5500 filings.  Wellness Reports empower advisors to be fiduciary experts by helping to identify more than 20 ERISA-specific fiduciary risk factors on a plan by plan basis.  Advisors can easily identify important changes in plan demographics that may trigger the need for a plan fiduciary to review plan fees or conduct a competitive request for proposal. 

Competitive Proposal Requests 

Fiduciary Shield offers a competitive request for proposal platform allowing advisors to request proposals from more than 20 active recordkeepers.  Recordkeepers who receive a proposal request through Fiduciary Shield are aware they are bidding on a competitive opportunity, approved by the employer, and have agreed to customize their proposal responses within seven days of the request being submitted.  

Transparent Analysis 

Proposals submitted by recordkeepers through Fiduciary Shield are presented to advisors in a simple and transparent format, allowing advisors to easily compare proposals side by side.  Leveraging Fiduciary Shield’s technology allows advisors to present a visually compelling comparison of a plans features, investment offerings, and fees. 

Document Procedures & Monitor Providers 

ERISA requires plan fiduciaries to put proper controls in place which support both monitoring service providers and documenting fiduciary procedures.  All requests for proposal, proposal responses, forms, and reports are documented to help meet ERISA regulations.  Fiduciary Shield also automates quarterly and annual plan monitoring reports to help advisors and plan sponsors meet their ongoing requirement to monitor providers.   


Plan Sponsor Guide to Choosing Form 5500

Under the provisions of ERISA, most 401(k) plans are required to annually file a Form 5500.  Although many plan sponsors have this prepared for them by a retirement plan service provider, they should be familiar with the requirements.  Understanding these requirements can help plan sponsors monitor plan service providers – an important fiduciary responsibility. 

Currently the federal government offers three versions of the Form 5500.  Which form a plan should use is generally based on the plan's participant count.

Form 5500-EZ

Required for “solo 401(k) plans” which covers a business owner and their spouse.

Form 5500-SF

Required for “small 401(k) plans” which covers plans with less than 100 participants on the first day of the plan year that meet the following requirements: 

  1. The plan satisfies DOL independent audit waiver requirements 
  2. The plan is 100% invested in “eligible plan assets” with readily determinable fairvalue (e.g., mutual funds, variable annuities) 
  3. The plan holds no employer securities

Form 5500

Required for “large 401(k) plans” which covers plans with more than 100 participants and small 401(k) plans that don’t meet the Form 5500-EZ or SF filing requirements. 

Plans that meet the requirements to file Form 5500 must also file certain schedules and/or attachments as seen below.


The 80-120 Rule

There is one exception to the Form 5500 filings known as the “80-120 participant rule”.  This allows any plan which filed in the previous year as a “small plan” and still has under 120 participants to continue to file as a “small plan”.  But if the number of eligible plan participants reaches 121 by the first day of a plan year, it is no longer subject to the “80-120 participant rule”. 

This is an important provision for plan sponsors to understand because all 401(k) plans that filed a Form 5500 as a “large plan” are required to be audited annually by an independent, external accounting firm.  An audit requirement can add thousands of dollars to the cost of filing a Form 5500.  Strategies, such as cashing out small account balances related to terminated plan participants, can typically be leveraged to mitigate a plan’s participant count avoiding this requirement and additional cost. 

Avoid These Penalties

A failure to properly report an annual Form 5500 can increase the likelihood of a Department of Labor audit and/or substantial financial penalties levied against the employer.  Employers that file a late Form 5500 are subject to the following penalties: 

  1. The IRS penalty for filing a late 5500 is $25 per day, up to a maximum of $15,000. 

  2. The DOL penalty for filing a late 5500 is indexed for inflation and can run up to $1,100 each day, with no maximum. 

Many employers faced with these penalties often don’t even realize they’ve missed a filing until they’ve been contacted by the IRS or DOL.  Of course, by that time, significant penalties will have already accrued.

The DOL does offer a program for employers who have not yet been notified to voluntarily report a late or missing Form 5500.  Through the DOL’s Delinquent Filer Voluntary Compliance Program (DFVCP) the maximum penalty for a single late Form 5500 is $750 for “small plans” and $2,000 for “large plans”.  The DFVCP also includes a “per plan” cap of $1,500 for “small plans” and $4,000 for “large plans”. 

More information about the filing requirements are provided by the DOL’s Reporting and Disclosure Guide for Employee Benefit Plans.

Remember that DOL Fiduciary Rule?

In the months that have passed since the death of the revised DOL Fiduciary Rule I can’t help but feel there was one key element seemingly lost in the discussion - why the changes were being considered in the first place. 

Back in 2015 The White House Council of Economic Advisors released a report detailing evidence that conflicted investment advice costs investors, on average, 1 percentage point lower annual returns on their retirement savings or $17 billion per year. 

Yet, here we are, barreling towards 2019 and those facts remain unchanged.   

So, as concerned (and frankly fed up) citizens we decided to do something about it. 

Our team has been working hard to create a platform that allows employers to request competitive retirement plan bids directly from top retirement plan providers.    

No conflicted advice.  No pay to play. No hidden fees. 

Fiduciary Shield by BidMoni delivers a layer of transparency to a process that has seemed to be made intentionally complex by many service providers. Employers can easily compare their current plan’s features and fees to the proposed plans’ features and fees side by side and make an informed decision, conflict of interest free. 

Choosing a retirement plan that puts more of your employees’ money to work for them has never been easier. 401(k) plans were created for the sole benefit of hard-working Americans saving their hard-earned dollars towards a future retirement.  It’s about time we got back to that. 

Financial Advisors: Are you who you say you are?

In our society an individual's success is often viewed through a lens that, for many, has a significant focus on an individual's income. Within the financial services industry the lens used to judge success is particularly narrow, mainly focused on:  increasing assets under management, increasing revenue, and ultimately increasing income. 

As a result, the most successful financial advisors are typically tremendously talented sales people.  Their communication skills, usually never better than when they are pursuing a potential client, allow them to explain and simplify complex financial problems with ease. 

Yet one of the most common complaints that I hear from retirement plan participants and plan sponsors is that they never see or hear from their financial advisor. 

I think that may be because financial advisors find themselves caught between their commitment to service existing clients and chasing the annual trophy of success by narrowing their focus towards gathering assets and increasing their income. 

In order to achieve lasting and meaningful success in the retirement plan space, advisors must commit to a service model after landing an employer's plan. 

The Department of Labor has created a roadmap of success for financial advisors looking to build their practice in the retirement plan space.  Financial advisors may play any of the following roles depending on the needs of the plan sponsor: 

  • Plan Design & Provider Selection – Plan sponsors are fiduciaries and as such are required to choose a plan using a prudent process.  Many plan sponsors will look for a financial advisor to make recommendations about different providers, fees, and investment options.  The DOL also expects that the plan sponsor will conduct a competitive request for proposal for plan services every 3-5 years. 
  • 3(38) Investment Manager – As a 3(38), a financial advisor has legal discretion to make plan changes.  A financial advisor with this role has also taken on the role of a fiduciary. 
  • 3(21) Investment Manager – As a 3(21), a financial advisor makes recommendations to the plan sponsor but does not have discretion to make changes on their own.  A financial advisor in this role is also considered a fiduciary. 
  • Employee Education – Plan sponsors are required by the DOL to provide education regarding the plan to participants.  This is typically the main role of a financial advisor who is servicing a retirement plan. 

Advisors should be able to clearly articulate the roles that they are fulfilling for the plan sponsor and what their compensation will be for that service. 

One of the effects of the DOL’s years long public review of the fiduciary rule is that many plan sponsors are putting plan fees under a microscope while reviewing the role of their financial advisor. 

Fiduciary Shield by BidMoni was created for plan sponsors and advisors to simplify the process of achieving many of the fiduciary requirements of managing a retirement plan.   

If you are responsible for any of the following:  

  • Conducting a competitive RFP  
  • Analyzing service provider proposals 
  • Fee benchmarking 
  • Investment benchmarking 

Please visit https://fiduciaryshield.bidmoni.com for more information about leveraging the power of Fiduciary Shield by BidMoni to better service your clients and win more retirement plan business. 

Digital Engagement is Differentiating the Most Successful Advisors Practices

A new study from global research and consulting firm Cerrulli Associates finds that digital offerings will not replace advisors, rather they will improve the way that advisors form relationships with their clients and scale their practices. 

The study titled U.S. Retail Investor Advice Relationships 2018: Optimizing Engagement was the subject of recent news articles that can be read here and here 

According to the articles, “digital engagement ‘will be a core component of every firm’s wealth management offering,’ the report says — and Cerulli estimates that total assets in the digital advice segment will reach approximately $295 billion by the end of this year and exceed $1 trillion by the end of 2023.” 

The report also analyzes the impact of fee compression on investor behavior and concludes that while fee compression is a frequent topic of concern among wealth management providers, relatively few investors cite fees as their primary determinant in provider selection. 

Clients today have an increasingly high expectation for the use of technology in financial services yet expect a human to be available to help them along the way.  Advisors leveraging digital tools like Fiduciary Shield by BidMoni with their clients are creating more efficient face to face meetings while improving their relationship management practices.   


Wake Up Call for Retirement Plan Sponsors and Advisors

Retirement plan sponsors play the role of a fiduciary even when they hire a financial professional to make plan decisions on their behalf.  The ongoing saga of Vantage Benefit Administrators should serve as a cautionary tale for plan sponsors and financial advisors. 

On October 23 a federal grand jury indicted professional fiduciaries, Jeff and Wendy Richie, co-owners of Vantage Benefits Administrators for allegedly embezzling $14.5 million from retirement plans that they managed.  Vantage Benefits Administrators marketed itself as a retirement plan third party administrator and professional 3(16) fiduciary to plan sponsors. 

This case is particularly troubling for the financial services industry because Vantage CEO Jeff Richie had been previously been sanctioned in 2008 by the Securities and Exchange Commission and had been barred from the investment business for three years “for conducting an unregistered and fraudulent offering of securities in the retirement-services company he was running at the time.” 

Organizations that provide third party administration services and act as a 3(16) professional fiduciary are not regulated by the financial services industry and so the SEC’s sanctions would not have applied to Richie’s operations as a third party administrator to retirement plans.  If convicted on all counts, the Richie’s face up to 81 years in federal prison. 

At least one financial advisor that referred business to Vantage Benefits Administrators has also found himself tangled in litigation over these allegations.  Allpoints Inc., an architectural firm, filed suit against World Equity Group and advisor Todd Rollins for recommending Vantage Benefits Administrators as their 401k TPA. 

According to the suit, as a result of Rollins’ recommendation, Allpoints’ 401(k) plan lost at least $438,919 from January to May 2017 as Vantage and Richie allegedly withdrew assets from the plan. 

Financial advisors should keep a close eye on the outcome of the Allpoints case and understand the risks of making referrals to other business professionals involved in the administration of retirement plans.


Breaking Down Fiduciary Services 3(16), 3(21), and 3(38) under ERISA

The intention behind ERISA was to ensure that those who manage retirement plans or their assets do so solely in the interest of plan participants and make good choices about investing plan assets.  Intentions aside, the regulations governing employee retirement plan administration tend to be confusing for employers.

Section 3 of ERISA contains the definitions that apply to the statute and defines ERISA fiduciaries in three sections – 3(16), 3(21), and 3(38).  Let's take a look at each section.

Section 3(16)

ERISA defines a Plan Administrator in section 3(16) as the individual designated by the employee benefit plan, the plan sponsor, or, in the absence of such designation, someone the Secretary of Labor determines. A plan sponsor is defined in that section as the employee organization (for a single employer plan) or the association or group of representatives of the organizations or parties making the plan (for a multiple employer plan). The Plan Administrator is the named fiduciary responsible for all plan administrative functions, including hiring and monitoring other plan service providers. The plan sponsor is often the named plan administrator, but an employee or committee of employees may also be named. Alternatively, a third party may be designated to provide some or all plan administration services. It should be noted that a third party administrator, or TPA, is generally not a section 3(16) administrator, although the TPA may agree to take on fiduciary responsibility for some or all of the plan administration services.

Section 3(21)

Section 3(21) of ERISA generally defines an ERISA fiduciary as someone who exercises any discretionary authority or control regarding the management of an employee benefit plan or the disposition of its assets. A fiduciary under section 3(21) also refers to someone who renders investment advice in exchange for compensation. Finally, section 3(21) also defines a fiduciary as someone with the ability to administer the plan. A section 3(21) fiduciary includes the plan trustee and plan administrator as defined above

Section 3(38)

Section 3(38) of ERISA defines an investment manager as an advisor who renders discretionary investment advice to an employee benefit plan. An investment manager is one who has the power to manage, acquire, or dispose of any asset of the plan and has acknowledged in writing that they are a fiduciary with respect to the plan.

While a section 3(21) investment fiduciary recommends investments and investment strategies to plan fiduciaries who either approve or reject them, an investment manager is given the discretion to implement those recommendations and strategies without the approval of other plan fiduciaries. Because of the increased responsibility of an investment manager, ERISA requires that this function is performed by a registered investment adviser under federal or state law, a bank, or an insurance company.

A simple way to understand the difference between the 3(21) & 3(38) service – a 3(21) provides investment recommendations while in contrast a 3(38) provides investment decisions to the plan.

How should a plan sponsor choose among the different types of third-party plan fiduciaries?  Plan Sponsors should consider their own ability to meet the requirements of ERISA as a fiduciary and, regardless of their own abilities, whether they want to mitigate their personal risk by hiring a third-party fiduciary.

Finding the Right 401k provider just got easier

For years, the selection of a 401k provider for a company retirement plan has been a pain point for Business Owners, CFO’s, and Human Resource Professionals. The process can be long, sometimes taking 6 months to a year. There are also different strategies (internal committees, consultants, or just trusting your advisor to shop your plan) that plan sponsors have used, but due to the lack of time and resources, many employers have put off going back though the process! Many plans have not been shopped in 5, 10, 15, sometimes 20 years! This has lead to 3 major problems:

1.Is your current plan the right fit for your employees (are you doing what is in their best interest)?

2. The DOL maps out in their guide Meeting Your Fiduciary Responsibilities that the core duty of a plan sponsor is to make sure ‘plan participants are only paying reasonable expenses’ and ‘this process is documented and you have a basis for making these decisions’

3. The Supreme Court decision in Tibble vs Edison, determined that a plan sponsors fiduciary duty is a ‘continuing duty’. This means that even if the plan was suitable at the time of implementation, it is your duty to validate ‘continually’ that the plan is still suitable for plan participants. This ruling has lead to the numerous Excessive fee lawsuits against various plan sponsors.

Fintech Start-up BidMoni Inc. recognized the pain points of Plan Sponsors and set out to build a tool that not only simplified the process and time spent by Business Owners, CFO's and Human Resource Professionals, but also provides a record and ongoing monitoring of the providers inside your plan. These processes assist the Plan Sponsor in staying on top of their fiduciary duties. That was the foundation of BidMoni's flagship product Fiduciary Shield. The founders believed there should be a marketplace that allowed Plan Sponsors to easily shop their existing 401k plan (or like plan), by pricing the parts separately, while maintaining a level of privacy assisting in avoiding unwanted solicitation calls. "There are different parts of 401 k plans that have often made it difficult for Plan Sponsors to make an apples for apples comparison." Says Co- Founder Stephen Daigle. "Traditionally some companies bundled all of these services together" says Co-Founder Michael Steffan. "This makes it difficult to see what you (or your employees) are paying for. Often plans are paying for services that their employees aren't utilizing." Fiduciary Shield by BidMoni provides a break down of the different fees and features of each part of a 401k plan, while identifying ‘red flags’ that have gotten other plan sponsors in trouble in the past. So what are the parts of a 401k?

1. Custodian (trustee)
The custodian is the holder of the plan assets. The custodian houses the assets contributed by the employees inside of the plan. Where the assets go is directed by the Recordkeeper. These services are often paired with the Recordkeeper, however, some Recordkeepers will provide you a choice of different custodial partners.

2. Recordkeeper

The 401k Recordkeeper is the bookkeeper over the plan. A few of their main tasks are tracking the money as it comes in and out, tracking the investments the participants want their money directed to, and generating statements. The Recordkeepers are typically the provider that you see on your statement or website when viewing your account. Recordkeepers often offer a variety of different resources designed to help plan participants reach their retirement goals (online enrollment, onsite enrollers, self directed brokerage portals etc.) These services can vary greatly from company to company, so it is good to evaluate all of the features available to you and your employees. Many Recordkeepers offer multiple platforms (Annuity, open architecture) so assistance through these choices might be beneficial. Fiduciary Shield by BidMoni can help you determine what plan is right for your employees.

3. Administration

These duties can often overlap with the Recordkeeper. It is common to see Recordkeepers offer a “bundled” service in which they provide both the Recordkeeper and Administration services. If this is not the case, a TPA (third party administrator) is often brought in to perform these tasks for the Plan Sponsor. The TPA assists with many of the compliance functions as required by the IRS and the DOL. These include annual 5500 filings, discrimination testing, and loan processing to remain in line with the plan document. Some TPA’s will go as far as to act as the 3(16) administrator that controls the day to day operations of the plan, assisting the employer with off setting administrative liability.

4. Investments

Many people assume that by selecting a Recordkeeper, you receive an investment lineup that they monitor. In light of the recent lawsuits, we see that this is rarely the case. If you steer towards an open architecture style 401k platform, this will leave you with roughly 25,000+ mutual fund/ etf options to design your plan. If this is a task you wish to take on yourself (not recommended) you will need to have an Investment Policy Statement on file and keep records of your evaluation process and monitoring. The other option is to outsource these responsibilities to a third party investment advisor (recommended). There are two different options that you can select:

3(21)- The third party will provide a list of suitable investments that you can select from. You are responsible to make changes if the fund is removed from the recommended list.

3(38) - The third party selects the funds on behalf of your plan and make changes to the fund lineup when they identify a more suitable option.

5. Advisor

A financial advisor can be included in the fees of the plan, but some plan sponsors do not utilize an advisor. If using an advisor, you need to know what tasks they are performing to assist with a plan. These can include 3(21)/ 3(38) services, group education, one-on-one employee meetings, employee account management, etc. The level of service should set a reasonable compensation for the advisor. If you have not seen your advisor in 2 years, or if they are not providing any of these services, it might be time to look for a new advisor. It is also beneficial to make sure you have a contract with your advisor stating how many days they will be available to perform these services. This will help with verifying the fee being paid is reasonable. It's also good to know the structure of the firm your advisor works for, some Broker Dealers firms/ RIA’s have a very limited number of Recordkeeping 'partners'. Others have a more ‘independent model’ allowing them to accommodate more Recordkeeping partners and flexibility in plan offerings. This can have an effect on your ability to change parts of the plan in the future.

Remember, it is not only important to get your plan in good order, but you need a system in place to help your plan stay in good order. Fiduciary Shield by BidMoni was created to assist employers through this process to help Plan Sponsors save time and money.

Fiduciary Shield Launch

Fintech Firm BidMoni Launches Fiduciary Shield, a Retirement Plan Platform That Assists Plan Sponsors to Meet their Fiduciary Duties and Reduce Plan Costs

Proprietary tech platform empowers plans to engage in a competitive bidding process for the first time, offering them significant savings and other fiduciary benefits

MOSS POINT, Miss., June 20, 2018 -- With America’s U.S. retirement savings deficit in the trillions of dollars and growing, BidMoni has announced the launch of Fiduciary Shield, the first platform that allows retirement plans to quickly and easily solicit bids from dozens of the country’s top retirement plan providers.  Fiduciary Shield analyzes proposals so plan sponsors and financial advisors can determine the best plan, document the entire process to stay compliant, and automatically monitor plans on a ongoing basis.      

Fiduciary Shield was designed by retirement plan experts Stephen Daigle and Michael Steffan, who together bring 26 years of problem solving in the financial industry for some of the largest financial institutions in America.  CTO Kendall Dixon, president of Dixon Consulting and Development, is also a founder and brings expertise designing technology solutions to improve and simplify the processes of investment firms. 

Until now, companies wishing to provide a 401(k) plan needed to contact and request proposals from each individual plan provider they reviewed. This process could take months and the plan sponsor still had no easy way of comparing the resulting bids to ensure that plan costs and features were appropriate and reasonable, both of which are required under ERISA law.

Fiduciary Shield enables plans of all sizes to conduct a robust Request for Proposal (RFP) process that can help them lower their costs and reduce the potential liabilities associated with their plans, while improving their plan’s quality. Fiduciary Shield pairs users with industry leaders in retirement plan administration to provide these proposals.

“Offering employees the benefit of a retirement plan has become a burden for many plan administrators and business owners—but particularly for plans with less than $25 million in assets,” says BidMoni Co-CEO Michael Steffan, Jr. “We believe these plans should have the same competitive opportunities as larger plans.”

There is no cost to a plan for initiating the RFP process and it takes less than a half-hour to get started. If a plan sponsor selects a new plan provider, it pays Fiduciary Shield a nominal fee to monitor the plan and provide ongoing alerts.

Fiduciary Shield has partnered with First Ascent Asset Management to work with plan sponsors who want to delegate fiduciary responsibility for the management of plan investments.  First Ascent will serve as an independent “3(38) manager.” They accept fiduciary responsibility for selecting and monitoring investment options and can remove the conflicts of interest that have been the cause of many recent lawsuits.

The new platform is available to retirement plans of all sizes, including 401(k), 403(b), and 457(b) plans.  Financial advisors can bring this service directly to their clients, even if they are not, themselves, retirement plan experts.

“Throughout our careers, we have worked with school teachers and businesses big and small and we’ve seen the devastating impact that high investment fees and layered service fees can have on retirement savings,” said Founder and Co-CEO Stephen Daigle. “With Fiduciary Shield, we are reducing the time and expense of plan sponsorship and helping plan sponsors discharge their legal obligations as a plan fiduciary.  Our goal is to create an open and transparent marketplace for companies to create the best plan for their employees. Ultimately, that will help to break down the barriers that have prevented individual participants from adequately saving and investing for retirement.”

About BidMoni 
BidMoni, Inc. is a Fin-Tech start-up designed to bring transparency and efficiency to employer sponsored retirement plans, including 401(k), 403(b) and 457(b) plans.  BidMoni’s flagship product, ‘Fiduciary Shield’, provides plan sponsors the opportunity to have industry leading plan providers compete for their business.  Fiduciary Shield is easy to use, helps satisfy the Department of Labor (DOL) requirement that plans pay only reasonable fees, and ensures that the process is fully documented. 

About First Ascent Asset Management 
First Ascent provides outsourced portfolio management services to financial advisors and their clients. The firm’s founder, Scott MacKillop, is a 40-year veteran of the financial services industry and has been providing asset management services to financial advisors for over 25 years. First Ascent is a registered investment advisor.

For more information please visit Bidmoni.com, or to schedule a demo of the platform, contact Support@Bidmoni.com.  


Warning signs in my 401k

401K's provide your employees the opportunity to have sufficient money available upon retirement, so they can enjoy a comfortable lifestyle. As the employer offering this valuable benefit, have you given any thought as to how the plan you intend to provide should be structured? There is significant variability between competing plans in cost to the employer, service to the employee, transparency, flexibility, etc.; all of which must be carefully weighed before choosing what best suits your goals. It can be daunting and time consuming to sort through the choices available and then select a plan that truly satisfies you and your employees needs. Oftentimes, the choice made is not optimal, yet because the process was so painful, the plan chosen is kept anyways. In many cases, that plan stays in place for years.

The following are some of the red flags to look for in your current plan or your plan moving forward:

  1. Annuity Plan Platform

The Annuity plan platform is usually a pre-packaged plan. The plan often offers a set fund list along with pre-packaged plan agreement terms that require few decisions to be made by the plan sponsor. One of the drawbacks to this plan type is that it has been historically difficult to identify administration fees. That presents a challenge for the Fiduciary, as one of their main duties under the law is to insure plan fees are reasonable. Another drawback is that many of the funds within the plan are not easily traceable, as they lack a "ticker symbol". This makes it difficult to individually track and monitor those plan funds. In the long term, an annuity plan platform makes it difficult to change one plan feature, without having to change everything.

Better Alternative-

Open Architecture Platform

This plan provides a platform that allows more customization. Open architecture structure allows access to a universal selection of funds. This may entail slightly more work, but this sort of structure allows for a more transparent view of fees. Although we believe this structure to be more beneficial in light of fiduciary requirements, be aware! Not all platforms claiming to be “open architecture” are created equal.

  1. Proprietary Fund Requirements

It is easy to be drawn into a lower fee by offering certain proprietary funds recommended by your Recordkeeping firm. Although some of these funds may be suitable at the time,  if you need to change those options in the future, it can bring about more issues. If you replace those proprietary funds, how will it affect the pricing of the rest of the plan?

Better Alternative-

No Proprietary Requirements:

It is smart to receive pricing on your plan without any proprietary requirements. Most providers will then offer a discount if the proprietary offerings are utilized. This will provide a record of the discount that will be removed if funds are changed in the future.

  1. Revenue Sharing Funds

We believe this to be the number one red flag in a plan that needs to be evaluated. Are the funds in your plan currently paying a revenue share back to one of the service providers? In other words, are you providing the lowest available share price in your plan? With thousands of mutual funds/ etfs to sort through, you need to make sure you are offering the most cost effective share price to your employees.

Ex: Fund Share Class X has an expense ratio of 0.75%; the fund pays 0.25% to the record-keeper.

Better Alternative-

No Revenue Sharing.

Ex: Fund Share Class Y has an expense ratio of 0.5%; the fund pays 0% to the record-keeper.

It is obvious which one is better for your employees. The service provider fees should be transparent and not rely on indirect "sharing".

  1. You Select Investment Lineup

If you do not know who is selecting the investment lineup, it is probably you. You are responsible for this action on an ongoing basis. If your company has not specifically outsourced it thru a third party 3(21) or 3(38) agreement, then it is your responsibility. If this is the case, you need an investment policy statement on file as well as a system to regularly monitor and replace poor investments (and make sure to record the process of monitoring and/or replacing).

Better Alternative-

Ousource through Third Party Investment Advisor.

Unless you are experienced in this field and feel that you can meet the DOL definition of prudence, this is your best choice.

3(21)- will provide you a list of funds to select from, but you will be required to make changes to the plan if the funds are removed from the list.

3(38)- the third party manager selects your fund line up and continues to monitor and make changes on your behalf.

  1. Guaranteed Interest Option With Trade Restrictions

Your plan will generally offer an investment option for “conservative investors”. As we cannot recommend the best way to go, we can recommend what features to look out for. It is easy to be drawn to a very high yielding rate, but are there stipulations to your employees moving money out of the account? These stipulations can often limit participants to move only 20% a year out of the fund into other investments, and we have seen some as high as 10 year restrictions! You also need to be aware of potential plan level restrictions if you decide to change this fund in the future. Many funds require a systematic payment, or they are subject to an MVA (market value  adjustment). These will reduce the value of your employees accounts when the fund is liquidated.

Better Alternative-

Conservative Option With No Restrictions

No one wants to have the talk with an employee about why their money is stuck in a fund or why their balance dropped when the plan was changed, so stick with a liquid conservative option.

  1. Conflict of Interest

Did you make your decision based on what was in the best interest of the employees? You are representing your employees, so you cannot make a decision based on a benefit to you that is not also an available benefit to them. Whether you are helping a family member or you are connected to an association, your obligation is to the employees, period. A number of service providers offer to sponsor associations, conferences or scholarships-which are all positive-as long as that does not influence your judgment when deciding on the best plan for your employees.

Better Alternative-

Avoid Conflicts

Remember, even if there is no malintent, it can still be perceived as improper. If a service provider is attempting to push you to violate your Fiduciary duty, it may be best to go with another provider.

  1. Absent Advisor

Advisors are very common in plans, but you need to know what the advisor fee is paying for. Are they selecting the investments, meeting with employees, providing group education to the employees, or actively managing employee portfolios? Advisors can do all of these, some of these or none of these. It is important to know that the advisor servicing your plan is either earning his/her keep, or being under compensated for all they are doing for your employees.

Better Alternative-

Advisor Contract

Get a written description of what your advisor should be providing. This will allow you both to understand the expectations of the other. You will also be able to hold them accountable for the services that they agreed to offer. If they are not performing as expected, it may be time to consider a new advisor.

  1. Knowing Fiduciary Responsibilities as Defined by the DOL.

As written in the DOL 'Meeting your Fiduciary Responsibilities', these are the basic requirements of a Fiduciary:

  1. Acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them;
B. Carrying out their duties prudently*
  2. Following the plan documents (unless inconsistent with ERISA);
  3. Diversifying plan investments; and
E. Paying only reasonable plan expenses


*The duty to act prudently is one of a fiduciary’s central responsibilities under ERISA. It requires expertise in a variety of areas, such as investments. Lacking that expertise, a fiduciary will want to hire someone with that professional knowledge to carry out the investment and other functions.

 Fiduciary breach suits have focused much more on establishing a process and sticking to the guidelines, as opposed to the results. Watch out for new 401k providers offering “cost saving platforms”. That is not to say these solutions are not viable, but remember, the process is what is important. You need to be sure to compare multiple offers that are providing the same features. "Their ad said they were better" or "they said they are cheaper" does not count as a process. Lastly, providing full disclosure to all of your employees is often the best policy. Everyone needs a little accountability!

Better Alternative-

It is best to bid out your plan at least every 3 years (or as major changes occur) and conduct an ongoing monitoring of the plan between these periods to make sure the services provided are carried out and the employees are happy. You should also benchmark your plan fees (compare to other plans with similar demographics) annually to make sure that your employees are not overpaying. If you do not feel confident that you can perform these duties, then you need to find a service that can do them on your behalf.

Fiduciary Shield by BidMoni was created to assist plan sponsors in identifying these red flags while allowing a cost saving, more transparent plan to your employees. Access BidMoni.com today to allow industry leaders to compete for your plan.