Many companies are outsourcing more and more activities, mainly because outsourcing can provide cost savings and increase productivity. Outsourcing allows companies to focus more on their core businesses, rather than spending time on areas outside their expertise. For firms that are retirement plan sponsors, outsourcing 401(k) plan services makes sense for the reasons noted above, as well as several other grounds:
As a plan sponsor, you and your company are plan fiduciaries and can be held legally responsible for the plan’s administration and performance. Many sponsors outsource some or most responsibility. A 3(21) investment fiduciary assumes part of the risk, functioning as a co-fiduciary that provides prudent and objective advice. A 3(38) investment fiduciary accepts total responsibility and liability for selecting, monitoring, and replacing investment options, which helps the plan sponsor manage the risk of legal action concerning investment decisions.
Increased objectivity. Independent third-party plan administration helps your retirement plan by managing conflicts of interest, biases, or self-interest. As set out in the Employee Retirement Income Security Act of 1974 (ERISA), both 3(21) and 3(38) investment fiduciaries are required to act solely in the interest of plan participants and must act prudently when making decisions about the plan. These actions provide plan sponsors and plan participants with a greater level of risk management and confidence in the retirement plan.
Increased Service Level
Typically, a third-party plan administrator can devote much more time and attention to the administrative support of your retirement plan than employees can. Employees often “squeeze in” plan administration tasks around their regular duties, and may lack the skills, training, and resources that an outsourced administrator can offer.
FiduciaryFirst provides both government, and corporate retirement plan sponsors a comprehensive fiduciary process that includes both operational and fiduciary investment administration. We follow our Prudent Fiduciary ProcessSM (PFP) to help your company manage personal and corporate liability in an effort to position your participants for financial success. Our consistent approach helps your business save time and money, manage your fiduciary responsibilities, and track your plan’s performance. For more information, contact us at 866-625-4611 or visit www.fiduciaryfirst.com.
This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
Retirement Plan Consulting Program and other advisory services offered through LPL Financial, a registered investment advisor. This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.