Three Flavors of Retirement Plan Advisors. At Least for Now.
In addition to meeting their fiduciary duties under ERISA, a plan sponsor may look at a plan advisor and other plan service providers and ask, “Is this person focused on helping me get good plan governance in place for this plan?” Advisors can be critical allies in supporting your retirement plan’s needs.
Before you even adopt a retirement plan, an advisor, such as a consultant, can help you define your long-term, strategic goals for the plan. What do you hope to accomplish? What level of contribution will you make? Who will be allowed to participate in the plan? Once you have defined your plan objectives, a consultant can help you tackle the real-world, practical aspects of setting up and managing a retirement plan in accordance with the ERISA fiduciary standards. Support may include:
- Assisting you in selecting the initial menu of plan investments and providing ongoing investment information and support.
- Along with your legal advisor, educating you about your fiduciary responsibilities with respect to the plan and plan participants.
- Introducing you to solutions and additional service providers to help you administer the plan.
- Providing employee enrollment support and investment education for participants.
Some advisors also take on an ERISA fiduciary role when providing investment support. But, it’s important to know that not all advisors do this. Make sure the services provided by the plan’s service providers, and their fiduciary status, are clearly set forth in the written agreement for services. Ask as many questions as you need in your role as sponsor.
Selecting an advisor whose skills and service model align with your retirement plan’s objectives is a significant decision you will make as a plan fiduciary. As you consider advisor candidates, you will need to evaluate whether a non-fiduciary support model is the best fit for your plan or whether you would benefit from a plan fiduciary service provider, such as an ERISA 3(21) investment advisor or ERISA 3(38) investment manager.
There is no universally recognized best approach, but there are important differences to consider:
ERISA Fiduciary Advisor Services
Your due diligence process should compare the benefits associated with each model to determine the most suitable solution for your plan. The following chart lists some of the support functions commonly associated with the different service models.
It will be helpful to get good advice on how to create good processes and procedures to keep your plan in alignment with the law, as it changes over time. Plan advisors can help you create and maintain documentation in a way that will comply, as needed.
This article is for educational purposes only and may not be redistributed by the recipient without prior written consent from New York Life Investment Management LLC. This communication is not intended to be an offer or solicitation of investment advisory services or products.
Neither New York Life nor its agents or affiliates provide tax, legal, investment, or accounting advice. Plan sponsors should speak to their own tax, legal, or investment advisor or accounting professional regarding their specific situation.
The information contained herein is general in nature and is provided solely for educational and informational purposes.
All investments are subject to market risk, including possible loss of principal. Diversification cannot assure a profit or protect against loss in a declining market.
Opinions expressed are current opinions as of the date appearing in this material only. The information and opinions contained herein are for general information use only. MainStay Investments does not guarantee their accuracy or completeness, nor does MainStay Investments assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, and are not intended as an offer or solicitation with respect to the purchase or sales of any security or as personalized investment advice. There can be no guarantee that any projection, forecast, or opinion in these materials will be realized. Past performance is no guarantee of future results.
MainStay Investments® is a registered service mark and name under which New York Life Investment Management LLC does business. MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC
Prepared for an Institutional Audience.