Fiduciary Education Important for Plan Sponsors
When it comes to selecting the right retirement plan, employers are faced with multiple options. Particularly, non-profit, tax-exempt organizations can choose between offering employees either a 401(k), a 403(b) or both. In this case, conducting adequate research, asking the right questions, and selecting the right retirement plan advisor that can help guide employers through the decision-making process is important. Although it might be expected that most non-profits will skew toward a 403(b) plan, every organization should select the right plan based upon their own needs, values, and vision.
Upon the conclusion of The Plan Sponsor University (TPSU) Fiduciary Education Program held at The University of Maryland, Founder and CEO Fred Barstein, spoke with Adjunct Lecturer, Kim Cochrane. Kim, who is a Retirement Plan Advisor at Raffa Retirement, a division of Hub International, described the nuanced spectrum of needs that exists within the non-profit world, and how this affects the decision-making process for selecting a retirement plan. Although both a 401(k) and a 403(b) share many similarities, it is beneficial for the plan sponsor to select an advisor who understands the needs of the organization and can effectively communicate a plan that is most suitable. Cochrane discussed the importance of educating plan sponsors on the technical aspects of their fiduciary duty as doing so will inevitably develop the skills needed to help build the best plan for their employees.
Read the Full Transcript Here
Fred Barstein:
Greetings. This is Fred Barstein, CEO and founder of TPSU. We’re at the University of Maryland conducting a TPSU program, and I’m here with one of our adjunct lecturers, Kim Cochrane. Welcome Kim.
Kim Cochrane:
Thank you.
Fred Barstein:
Okay. If we ask you a few questions.
Kim Cochrane:
Of course.
Fred Barstein:
Okay. And before we do, why don’t you introduce yourself and what you and your firm do?
Kim Cochrane:
Sure. I’m Kim Cochrane. I work for Raffa Retirement Services, which is a division of Hub International. I’m a retirement plan focused advisor working in the DC mid-Atlantic area for for-profits and non-profit clients.
Fred Barstein:
Right. So, Kim, what are the specialties you have, not exclusive, but you work with a lot of ERISA 403(b) plans, not-for-profit companies. Are there nuances or differences between the 401(k) other than some technical collective trust and things like that?
Kim Cochrane:
Sure.
Fred Barstein:
Yeah.
Kim Cochrane:
We find it depends on what type of nonprofit we’re talking about. Hospitals and the NFL act very differently than a lot of social organizations that we end up working with or schools, private schools. We find that there’s a cultural difference into how we’re communicating with employees, how they take care of their own employees. Frankly, they’re more focused on aligning their mission with their vendors, so being able to really understand how they care for their employees and provide resources, understanding that paternalistic view of how they want to treat their employees.
Fred Barstein:
So, then I think it seems like they might be also wanting to have an advisor who understands that as well. Is that what you find?
Kim Cochrane:
A hundred percent, yeah. I mean, I have one client that I work with that’s really focused on making sure everybody learns financial strength. They weren’t raised that way, they weren’t taught that way growing up, but they want everyone to accumulate wealth, whether it’s inside a retirement plan or not, they want to build education, and we are completely focused on just that.
Fred Barstein:
Right. On that, so are there any more substantive technical issues between like a 401(k) and I know 403(b) not for profits, can also do 401ks as well?
Kim Cochrane:
Yeah, they can. There’s some nuances and some reasons why 403(b) plans are better, frankly, for not-for-profits. Fewer testing, fewer regulations, ability to really layer on additional benefits above and beyond what a for-profit client can do is a huge benefit. There’s a lot of discussion about going from a 403(b) terminated to open up a 401(k). Right now, there’s no difference in providers really on who’s available for these type of plans or what you would get investment wise really. But it’s really a function of there’s a better benefit to maintaining that 403(b)nonprofit plan. To give you those availabilities, to have less testing, less regulatory issues on there.
Fred Barstein:
Great. Well thanks for that. And final question for you. This is your first TPSU. What do you think the benefit is for plan sponsors and why they should come?
Kim Cochrane:
I was surprised being this our first TPSU to notice that the type of clients or sponsors that show up run from very small to very large, but their needs seem to all be the same. They’re looking for help with employees to education, learning about their fiduciary duties, making sure they’re doing what’s best for their employees and building a better plan. So, it’s really a nice way to get in and get technical to learn what you need to learn to protect you as a plan sponsor and be able to give it the best resources for your employees.
Fred Barstein:
Well great. Well, thanks for doing this. I know it takes a lot of time and planning.
Kim Cochrane:
Oh, appreciate it. Thank you.
Fred Barstein:
And thank you for watching 401kTV. Please stay tuned.
