With so many decisions to make and pitfalls to avoid — and a slew of new retirement savings plan law provisions going into effect — it’s more important than ever that today’s 401(k) plan sponsors receive expert guidance.
But here’s the challenge: Only a fraction of the professionals providing advisory services are true retirement plan experts.
Key Vetting Questions
Every plan sponsor needs a qualified plan advisor to help navigate the challenges of plan design, compliance, investment management and employee education. To ensure you get the expertise and participant-focused guidance you need, ask advisor candidates these critical questions:
- Are you a fiduciary for the advisory services you provide?
- Will you acknowledge fiduciary status in your service agreement?
- For how many clients do you provide plan advisory services?
Plan Design: Decisions, Decisions
Every plan has many features from which to choose. A knowledgeable retirement plan advisor can help you make the right selections to advance your plan goals. For instance:
- What eligibility requirements will you establish?
- What will your company match look like?
- What vesting schedule will you use?
- Should your plan be safe harbor or not?
- What investment options will you offer to participants?
Compliance and Risk
An advisor should be well versed in SECURE Act 2.0, the new retirement savings law. SECURE 2.0 includes several optional provisions, including an increase in the cash-out limit, eligible distributions for domestic abuse victims, and student loan “matching” for retirement plans, to name a few. The law also has mandatory provisions, such as expanding plan eligibility for long-term, part-time workers after two years of service starting in 2025.
What’s more, most employer-sponsored retirement plans are subject to the Employee Retirement and Income Security Act of 1974 (ERISA), and you need an ERISA-savvy plan advisor to support compliance.
Managing the Investments
An advisor acting as a fiduciary can also help you establish an appropriate fund lineup, keep fees reasonable and produce better participant outcomes.
A mutual fund can have up to 15 share classes, each carrying a different level of fees participants must pay. Mutual funds also have various levels of revenue sharing, where the fund may pay out built-in expenses to the record keeper, advisor and/or third-party administrator. A qualified retirement plan advisor can identify the lowest-cost share class appropriate for your plan and participants.
Two Types of Fiduciary Advisors
If you choose a fiduciary advisor, you will have to select from two levels of service outlined by ERISA.
A 3(21) fiduciary advisor provides investment recommendations and participates in review meetings with the plan sponsor’s investment committee. The plan sponsor makes the final decision on whether to implement the recommendations.
For a higher fee, you can opt for a 3(38) investment manager, a plan fiduciary who manages the plan investments, including selecting and managing the funds. 3(38) services offer a higher level of liability protection because the investment manager assumes responsibility for the fund lineup decisions.
Plan Advisory Services from Your Bank
Hancock Whitney provides 401(k) plan advisory services through our Retirement Plan Services group. One of the biggest advantages we offer is we are a fiduciary for every client. That means, whether we serve as a 3(21) plan advisor or 3(38) investment manager, our recommendations and decisions are always made in the best interest of participants.
Our plan advisory team members are highly accredited and well versed in retirement plan laws and regulations. We support employee education through group and one-on-one meetings with participants, and we annually supply industry benchmarking data so you can ensure your plan-related fees are reasonable and competitive.
Our team can help you start a plan or do a fiduciary review of your existing plan and offer ideas for managing it better. To schedule a review, talk to your banker or contact us at 1-800-651-9227
The information, views, opinions, and positions expressed by the author(s), presenter(s), and/or presented in the article are those of the author or individual who made the statement and do not necessarily reflect the policies, views, opinions, and positions of Hancock Whitney Bank. Hancock Whitney makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented. This information is general in nature and is provided for educational purposes only. Information provided and statements made should not be relied on or interpreted as accounting, financial planning, investment, legal, or tax advice.
Hancock Whitney Bank encourages you to consult a professional for advice applicable to your specific situation.
Hancock Whitney Bank offers investment products, which may include asset management accounts, as part of its Wealth Management Services. Hancock Whitney Bank is a wholly owned subsidiary of Hancock Whitney Corporation.
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