Retirement plan advisers are currently quite focused on the concept of fiduciary—in fact, much of the industry is. However, for many plan sponsors, that topic is still less important than understanding how they can improve plan performance, specifically participant outcomes. Good advisers can help sponsors with both issues. Nationwide’s Joe Frustaglio, vice president of private sector sales, and Chuck Rolph, director in the Advanced Consulting Group, spoke with PLANADVISER about considerations for reducing fiduciary risk and helping participants maximize retirement savings.
PA: You guys are in the field. In your conversations with retirement plan advisers, what are you most surprised by?
Frustaglio: One of the biggest surprises I see is the lack of time dedicated, by sponsors, to the retirement plan. Small and midsize business owners are consumed with running their businesses. When they spend time on their benefits package, health care trumps the retirement plan. The retirement plan often gets placed on the back-burner. Successful advisers are able to paint a picture for the plan sponsor of what a healthy retirement plan looks like and how it can positively impact the business in the future. Healthy turnover of aging employees—because they are financially prepared for retirement—is a huge benefit of a solid plan.
Rolph: Plan sponsors of smaller plans, those that lack the scope and scale for an in-house legal and human resources (HR) department, should look to their adviser to help them make most decisions regarding the plan; few understand and appreciate the legal obligations they’re undertaking when they sign plan documents.
There are what I call three internal fiduciary positions: the named fiduciary, the trustee and the plan administrator. Very often, one or more of the business owners occupies those fiduciary positions either by default or even consciously, but a lot of times they don’t understand what that entails.
PA: Those are big challenges and not easily solved. How can improvements be made?
Frustaglio: Improvements can be made early in the process. The retirement plan business is so competitive and so much more complex than it used to be. Too many proposals are being delivered based on the previously established plan design and price. Successful advisers ask about the sponsor’s current goals for the plan, take what is working and improve on design, service and education.
I like it when advisers not only speak to the health of the plan but take it further by painting a picture for the employer as to how it improves their business. At Nationwide, we call it “teach, tailor, and take control.” Plan sponsors want to know what’s going on, they want it tailored to their participants, and they want support in running a successful plan.
Rolph: I look at a retirement plan as being a bundle of three components: first, the plan documents; second, the funding aspect, the investments; and third, the administration. I think we can help plan sponsors improve outcomes and reduce liabilities if we bring those elements into a coherent package that the adviser can deliver.
For example, in the case of the plan and the trust document, we might use an institutional trustee to take that burden off so that the owners of a small company don’t have to serve as their own trustee.
We might look at an outside, ERISA Section 3(38) investment manager fiduciary to take care of the investment aspect, and then outsource the fiduciary role of the plan administrator. The other thing we can do is help them improve outcomes by structuring the investment in the plan to accomplish that.