Independent Plan Assessment Ensures Fiduciary Best Practices
Bronfman Rothschild Plan Advisors (BRPA) was brought in by a prominent law firm with 350+ employees to assess its retirement plan. Working in a consultative manner, BRPA’s first step was to conduct an independent plan assessment to help the firm evaluate how its plan stacked up against peers and fiduciary best practices.
The plan assessment report is designed to evaluate four vital areas including key plan health measures, the overall investment management structure, a checklist of key fiduciary responsibilities and best practices, and a benchmark report of plan fees and expenses. The report identified multiple opportunities for enhancements that ultimately led to the full engagement of BRPA as an ERISA 3(38) Investment Manager.
Once hired, the BRPA team initiates a three-step, proprietary “Plan Assessment” that analyzes and aims to improve a retirement plan.
1. Evaluate the Current Recordkeeping Arrangement
BRPA’s first step with nearly all clients is to evaluate the plan’s current recordkeeping arrangement. In this particular client’s situation, BRPA initiated and led an RFP process that included six top recordkeepers, creating a competitive environment for services and pricing. After evaluating the proposals, three finalists were selected and interviewed by the firm’s investment committee. The client ultimately selected a new recordkeeper that expanded the scope of services and revised recordkeeping costs.
2. Investment Review
The next step of the assessment is to conduct thorough due diligence of the client’s investment lineup. In the case of the law firm, the comprehensive report identified “best in class” investment managers in each desired asset class, evaluated share class options to determine the net lowest share classes available, and reviewed each revenue sharing arrangement to determine if it was equitable to all participants regardless of the investment options selected.
The analysis led to significant changes in the plan’s investment lineup. BRPA transitioned the fund lineup to institutional share classes (where available), restructured how revenue was handled and initiated “fee equalization.”
Once BRPA and a client agree to changes in an investment lineup, those new investment choices must be implemented within the plan. In this client’s case, an open “re-investment” process was recommended during the client’s recordkeeper conversion. This recommendation was made based on a need to address fiduciary concerns given the changes being made to the investment lineup. This action also encouraged previously “disengaged” participants by providing them with an opportunity to reselect their investments during the conversion or be defaulted into the plan’s Qualified Default Investment Alternative (QDIA) option if they did not take action.
BRPA conducted due diligence to review and select an appropriate QDIA option based on plan demographic factors, which in this case was a target date fund series. Providing required and clear communication to employees about the re-investment opportunity and QDIA default process led to important fiduciary safe harbor protection for the plan sponsor.
As with many plans, a high percentage of the law firm’s plan participants were not engaged with their retirement plan accounts, despite the fact that most were in self-directed investment accounts. The re-investment process led to the majority of plan participants shifting to professionally managed asset allocation investment options via the QDIA.
Bronfman Rothschild Plan Advisors employed its independent “plan assessment” process to help the law firm incorporate important changes into its retirement plan, with the ultimate goal being a plan that is optimized to maximize benefits for plan participants.
For this particular client, changes included revised recordkeeping costs and investment management fees, a broader menu of investment choices, a more transparent fee structure for plan participants, a simplified decision-making process for participants, and an increased use of professionally managed asset allocation investments by plan participants.
At the same time, the plan sponsor ensured fiduciary best practice processes were utilized and reduced its fiduciary liability by hiring BRPA as a “CEFEX Certified” 3(38) Investment Manager.
Learn more about Bronfman Rothschild Plan Advisors at www.belr.com and the benefits of working with a CEFEX Certified Advisor at www.cefex.org.