Retirement Plan Fiduciaries Now Look Through a Covid Lens

401k Plan DesignRetirement plan fiduciaries may notice their year-end 401(k)/403(b) reviews look different in 2020 than in years past.  Covid-19 has forced retirement plan fiduciaries to pivot how they manage their plan’s day-to-day operations.  Company goals and employees’ locations have shifted.  Many continue to work remotely due to the pandemic, thus it’s important for plan fiduciaries to understand any issues that arise with the plan now as it may be too late to reverse them after the new year.

As such, annual plan reviews need to be more comprehensive this year, i.e., include more than cursory fund performance reviews.  Specifically, retirement plan fiduciaries should follow these steps for year-end reviews:

  1. Assemble the retirement plan committee.  Does your organization have a formal retirement plan committee?  Do they understand their roles on the committee and whether or not they are retirement plan fiduciaries?  If they are, do they understand their fiduciary obligations to the plan?  Committee training is commonly used to determine members’ skillsets.  Specific tasks may be better completed by outsourcing to a third party professional.  Click HERE for free Retirement Plan Fiduciary Education!
  2. Evaluate critical plan engagement practices.  How are employees using the plan?  Is their primary point of contact the plan’s website, mobile app, or call center?  If your plan offers financial wellness, are employees taking advantage of it, and if so, how?  Do retirement plan fiduciaries have access to the data?  Can they use it to improve the plan?
  3. Review the participant communications strategy.  Is there an existing strategy? Different employee populations have different needs, and retirement plans have differing goals, so retirement plan fiduciaries should understand this is not a cookie-cutter strategy.  Be thoughtful in how you approach your participant communication strategy in the year ahead.  Be sure to recognize the unique needs of your employees and organization.
  4. Consider all fees and investment performance.  The lowest-cost offering isn’t always best.  Lowest-cost is not a DOL requirement. Most of the time, lowest-cost is not the most prudent option.  Retirement plan fiduciaries should consider that ERISA only states that plan fees should be reasonable for the value being delivered – nowhere does the law imply that employers should offer the least expensive option. When greater value is delivered at a higher cost, it can be considered reasonable.
  5. Benchmarking.  How often do your retirement plan fiduciaries benchmark plan features and metrics?  Does your plan compare favorably to other similarly sized plans in your industry?  It’s important that retirement plan fiduciaries are confident that their plan and fees are competitive.

This may sound like a lot of work for retirement plan fiduciaries before year-end.  Going forward, it can be helpful to break up these reviews throughout the year so the retirement plan committee can give proper shrift to specific topics on an individual basis.  That said, retirement plan fiduciaries should bear in mind that much has changed this year due to Covid-19 and they should conduct their year-end reviews accordingly.

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