The duty to monitor the services rendered is ever-present for Retirement Plan Fiduciaries who are responsible for the tax-qualified retirement plan and the corresponding assets. It makes no difference whether a committee has hired a 3(16) fiduciary, a 3(21) or a 3(38) fiduciary; the duty to periodically monitor the appropriateness of the decision to hire an outside professional, the duty to measure the effectiveness of the professionals hired and the requirement of insuring that all fees are reasonable cannot be moved away from the plan sponsor company.
Plan sponsors must lament the never-ending struggle to not only stay current on the do’s and don’ts of plan structure, oversight, communication and plan providers who have been engaged to handle specific plan tasks. Stated in other terms, the logic takes on the following form: I am a plan sponsor, I do not have the time nor do I possess the experience to manage the retirement plan assets, so I (or our retirement plan committee) will choose to hire an outside, nonrelated, professional third party to serve in the role of the plan investment manager with 3(38) fiduciary responsibilities.
That all appears to be a prudent decision and feels perfectly comfortable – until it comes time to monitor the activities (results) of the hired professional. To where does the plan sponsor turn, for obtaining help or learning process to make an informed decision on the job performance of a 3(38) advisor? Retirement plan fiduciaries and trustees who struggle with the circular-logic associated with hiring a specialized professional and then measuring the effectiveness of that professional may be encouraged by a recent SEC guidance release which outlines sample steps that a fund complex and their boards can take to ensure their fund assets are not being used to pay for the distribution of a fund.
Payments, the look and feel of payments, whether payments are direct or indirect or whether charges were reasonable are addressed. The write-up is a good checklist for stimulating thought in and around the plan sponsor evaluation of the investment advisor industry. Plan sponsors can learn a lot from within the article.
