Leaderboard

At another session at the 2012 annual conference, Sal stated that they never said you couldn't amend a safe harbor 401(k) mid-year to change things like the employer's address, phone, etc. and to think they did is just silly. Then, ASPPA GAC sent a comment letter in October 2013 asking the IRS to let us know if it is ok to amend a safe harbor plan mid-year to update the employer's address, phone number and Trustees. ASPPA also recently requested IRS guidance on whether an amendment mid-year to change the definition of spouse to comply with the Windsor decision was allowed mid-year for safe harbor plans. Given that the word "spouse" does not appear anywhere in 1.401(k)-3 or 1.401(m)-3, I put this request in the same category as ASPPA's request for the IRS to specifically bless amendments to update the employer's address or phone number. I agree with a co-worker who pointed out that controversy fills conference seats. <Rant mode off>

Selling 3(16) FIDUCIARY services, IMHO is just the latest "marketing gimmick." In most cases, the "admin" work of running a plan is handled by service providers in a non-fiduciary capacity that relieves the "day to day" burdens of operating the plan. Loan approvals, (safe harbor) hardship processing, Form 5500 prep, and the like are staples of the service provider industry and they have been doing it for decades as part of their service model. The question to ask is what does the plan sponsor actually gain from having those services now performed as a fiduciary function by a vendor, rather than having those services provided by a vendor in a non-fiduciary capacity? In my mind, not much. In either case, the plan sponsor remains a fiduciary and has an obligation to monitor the activities of the fiduciary or non-fiduciary service providers providing services to the plan. The key is: Does the vendor have a process in place that is consistent with performing the function correctly and timely, consistent with the terms of the plan and the standards of ERISA? If the answer is "no" then whether the service provider is a 3(16) fiduciary or a non-fiducary vendor, the plan sponsor has a problem. I believe there is a common misconception in the industry that a plan fiduciary can "off-load" responsibility by hiring another fiduciary to handle some functions. Only in the case of 3(38) investment management services (where ERISA recognizes that true investment savvy is something that not many plan sponsor may have) does the off-loading provide a "clear" break of liability - albeit in the limited sense of no responsibility for the underlying actual management of plan assets (but the obligations to prudently select and monitor still remain fiduciary obligations of hte plan sponsor). Even "proper delegation" of fiduciary functions to a 3(16) may not have the same "shield effect" that 3(38) has (and the statutory language is different - for a reason). More fiduciaries in the plan may mean more monitoring, more co-fiduciary liability, more headaches, and ultimately more liability. I counsel clients to 1) inventory fiduciary functions; 2) inventory those who perform them; 3) ensure the right people are performing the right functions (and all functions are covered); 4) develop processes to ensure the functions are performed appropriately; 5) build in "escalation" processes when a performer of a fiduciary function can't follow the process (in other words, DON'T LET THEM WING-IT); and 5) stop paying attention to the fear mongers that want to up sell you a service that you are probably already paying for anyway. If they can't use appropriate care in performing the non-fiduciary functions (without being paid more to do so as a fiduciary) - fire their a$$ and get a better (non-fiduciary) service provider.

Thank you. That's exactly what I was wanting to know!!!