727.441.9022 611 Druid Rd E • Suite 105 • Clearwater, FL 33756 V. Raymond Ferrara, CFP® Chairman Chief Executive Officer Eric R. Ebbert, MBA, CFP® President Chief Operating Officer THINK YOUR 401K IS FREE? THINK AGAIN! By Dorothy Campbell, AIF®, Senior Fiduciary Advisor Recently, there has been a lot of news about lawsuits against employers who sponsor retirement plans because they have not monitored the fees and investment options in their retirement plan. When you are responsible for other people’s money, you are a fiduciary as defined by the law and it’s your fiduciary duty to have a process in place to monitor your retirement plan. Large companies across the nation have put in place a process to thoroughly review their plans to ensure they are fulfilling their fiduciary duties and providing a competitive plan. However, companies in the small to mid-size space have not yet made creating this process with their plan a priority. If you are one of those companies, here are 3 reasons why creating a process and conducting a plan audit to your plan should be a top priority. 1. Reduce your personal liability Yes, if you are a fiduciary to your company’s retirement plan you are personally liable. Your fiduciary duty requires you to monitor service providers to ensure fees are reasonable and the service providers are performing as they should. As evidenced in recent employer retirement plan lawsuits, failure to do so can result in fines and settlements. One of the best ways to demonstrate that you are monitoring your plan is to complete a third-party detailed plan audit that benchmarks all aspects of your retirement plan. 2. Save the company and plan participants money Many companies implement a retirement plan with the purpose of helping their employees retire. Sometimes, recordkeeping, custodial and investment fees can make it more difficult for an employee to retire with sufficient savings if their fees are eating away at their savings. That is why ERISA requires employers ensure that fees are reasonable based on the services being provided, and a thorough third-party plan audit is a great way to do that. During a recent plan audit that we conducted, a large recordkeeper, reduced their costs by 15% when we simply asked for documents from the recordkeeper. Obviously results vary from plan to plan. Once we received those documents, we knew why they reduced their fees – they were too high! The plan assets had grown from $5 million 92 TAMPA BAY MAGAZINE | NOVEMBER/DECEMBER 2016 to nearly $20 million however there had been no adjustment in the recordkeeper’s fees which are based on the plan assets. Often, a plan audit can succeed in lowering your fees without changing your service providers. And if the current providers are unwilling to accommodate, than you will have the information that you need to go elsewhere. If you are able to lower fees for participants by just 1% of plan assets, it could mean an increase in your employee’s net retirement savings! 3. Improve your service providers A third-party plan audit will also analyze the services that are being delivered by the various service providers in addition to prices. Not all providers are created equal. Some have extremely high service models, some have advanced technology, others simply get the job done and even some just don’t show up. We have found that many employers don’t even know what to expect from their service providers. A thorough third-party plan audit, will measure typical services that each service provider should be providing so that you know what you should expect from the service provider. It will also see if there are any overlaps in services so that you can negotiate reduced fees from the service provider who is not delivering this service to you retirement plan. Depending on your company needs, you may be able to find a provider that can better accommodate the services that you want and possibly at a better price. In many cases, you can even work with your existing providers to improve what you are receiving. Many providers offer multiple service levels, and you may not be receiving the most that you can from them. Reducing your personal liability, saving your company and participants money plus improving the services you are receiving should be a top priority. In addition to those benefits, if you are ever questioned about your fiduciary process through a lawsuit or DOL/IRS Audit there is no better way to demonstrate a fiduciary process than through a third-party plan audit. We offer the audit to you with this guarantee: if the audit doesn’t find enough annual savings to pay for the audit, we will refund the audit fee in full. About ProVise Management Group, LLC: ProVise is a financial planning and investment management firm registered with the Securities and Exchange Commission (SEC) and has been in business since 1987. Our 12 professional advisors serve approximately 1030 clients in over 30 states. As of 6/30/16 we were managing approximately $1.22 billion for our individual, corporate, not-for-profit, and 401k retirement plans. Please visit our website at: provise.com. Investment Advisory Services offered through ProVise Management Group, LLC. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and are subject to change.
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