Why the 403(b) Community Needs Consulting Help

Institutions that sponsor 403(b) retirement plans are always on the edge of regulatory and ERISA compliance. Administrators who implement these plans typically find themselves overwhelmed with the rules needed to keep their plans in shape, and may ignore their ERISA responsibilities of managing the plan under the “duty to monitor” role. How? And what does this mean for your organization?

• 403(b) investment costs are generally higher when compared to the 401(k) market. However, institutions often do very little to compare vendor costs or change vendors to reduce fees. Who suffers when this important process is ignored? Employees.
• Many 403(b) institutions have more than one vendor, while typical 401(k) plans have only one vendor. This practice opens opportunities for administrative burdens, inconsistency in plan operations, no coordination of rules, inconsistent delivery of service, and poor communication. Who suffers? Employees.
• Some 403(b) vendors charge fees to participate in the plan, transfer assets, or withdraw accumulations from the plan. These charges create an inflexible service model. These fees can be as high as 10% of the account value. Who suffers? Employees.
• Fund fees play a huge role as expense ratios on vested assets for participants can range anywhere from .25% to 3.5% of investment expenses and higher. These fees affect employee returns and create reduced savings as a 1% fee savings on a $5,000 annual contribution for 25 years equals about $60,000 over the same period. Without the plan sponsor monitoring expenses, who suffers? You get the point.

The Solution

• Evaluating the existing plan to determine cost and design implications (if any);
• Engaging a plan sponsor to identify a “wish list” of services offered by the vendor;
• Creating a customized RFP;
• Reviewing vendor services including fees, employee education, investment options, vendor experience, local presence, web services, employee communication, proprietary and non-proprietary funds, and much more;
• Recommending finalists to plan sponsor based on a thorough vetting process; and
• Working with plan sponsor and client to integrate the vendor into the plan.

PRM 403(b) Audit Solutions Tool Kit

• Non-discrimination testing of employer sponsored plans;
• Analysis of plan operation compared to plan document policies;
• Review of plan communication material including Salary Reduction Agreements and Summary Annual Reports;
• Compliance testing of IRS limits against all plan participants;
• Review and creation of plan procedures monitoring vendor activities and complaints;
• Evaluation of coordination of benefits between vendors;
• Analysis of investment options;
• Assessment of plan fees;
• Review or creation of investment policy statement;
• Analysis of fiduciary responsibilities; and
• Introduction of the MEP 403(b) Solution, which eliminates client fiduciary and Form 5500 responsibilities.

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