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If Your Retirement Plan Is Out Of Date Or In Non‑Compliance, You Are At Risk.

Recent and anticipated changes to the U.S. Department of Labor’s Fiduciary Rule and potential new SEC rules may mandate new compliance requirements for retirement plan services sponsors and providers. If your retirement plan is out of date or in non-compliance, then you are at risk.
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401k Plan Sponsor Information

Learn more about the benefits of switching your 401k and Retirement Plan Services to 4Thought Financial Group in this overview for plan sponsors.

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Learn more about 4Thought Financial Group's Retirement Plan Services

Saving enough money to live comfortably during retirement is a chief concern among countless Americans. For so many, retirement plan services provided by plan sponsor employers, unions, or other professional bodies maintain this critical financial lifeline, often via a 401(k).

Such strategies create a route to achieving investors’ long-term financial objectives, with significant benefits, including (often) inexpensive market exposures, tax deferral, annuitized benefit payments, among others.

Sponsors overseeing retirement plan investment decisions themselves, or outsourcing their fiduciary management to one or more third parties, may not be aware of potential risks they may be susceptible to regarding recent and anticipated regulatory changes related to the U.S. Department of Labor (DOL)’s Fiduciary Rule or similar rules potentially to be issued by the US Securities and Exchange Commission (SEC).

It’s not only imperative for retirement plan services sponsors to know these potential liabilities, but also how to quickly and effectively minimize and remedy them. Below is a brief explainer identifying several key areas of concern, as well as insights to help assist in addressing these.

First, a little background.


What Is ERISA?

The federal Employee Retirement Income Security Act of 1974 (ERISA) mandates threshold standards for the majority of private industry pension and health plans, to protect those covered within.

Among its requirements, such plans must:

  • Advise participants of pertinent features including funding
  • Adhere to minimum standards for benefit accrual and funding, vesting, and participation
  • Assume fiduciary responsibilities for those controlling and managing plan assets
  • Establish an appeals and grievance process
  • Grant rights for participants to sue for breaches of fiduciary duty and benefits
  • Guarantee payment of benefits through the Pension Benefit Guaranty Corporation (PBGC)


DOL Fiduciary Rule

Published in the Federal Register on April 8, 2016, the U.S. Department of Labor’s “final regulation” defines who is a “fiduciary” of an employee benefit plan under ERISA as a result of extolling investment advice to a plan or its participants and/or beneficiaries. It also applies to the definition of a fiduciary of a plan, including an individual retirement account (IRA). Although the implementation of this rule through the DOL looks doubtful as of the writing of this article, it has both brought the issue to the public eye and provided an impetus for the SEC to consider implementing its own set of similar rules in its place.

Under the DOL rule, those who provide investment advice or recommendations for a fee or compensation regarding assets of a plan or IRA are considered fiduciaries in a broader range of advice relationships—with the intention of better protecting plans, beneficiaries, participants, and IRA owners from conflicts of interest and other issues.

The regulation mandates that advisors must act with their clients’ best financial interests in mind, and put clients’ interests above their own. 

While primarily applying to financial advisors offering retirement plan services, plan sponsors’ compliancy obligations will also be impacted.

Although originally scheduled to be phased in between April 10, 2017 to Jan. 1, 2018, President Trump ordered a review once assuming office, with full implementation pushed back till July 1, 2019. A recent ruling by the Fifth Circuit Court of Appeals may have set the table for a potential review by the U.S. Supreme Court (and ultimately a scrapping of the DOL rule implementation), but the general issue of fiduciary responsibility has been so heavily covered by the financial media that it’s hard to see the issue leaving the public conversation any time soon.


Regardless of the continued confusion about ever-evolving current status of the rule, however, plan sponsors should be prepared for anything.

Knowing Your Fiduciary Responsibilities

Fiduciaries and plan sponsors are tasked with protecting participant workers and retirees must conduct due diligence and fulfill specific obligations.

Among these duties:

  • Comprehension of benefit plans’ terms
  • Stringent selection and monitoring of service providers
  • Contributions to fund benefits on timely basis
  • Observe prohibited transactions
  • Timely disclosures to participant workers and beneficiaries
  • Timely reports to the government

How Plan Sponsors Can Limit & Rectify Potential Risks


Understanding the expanded application of the fiduciary standard and the reasoning behind these changes is the first critical step toward ensuring your plan is in compliance. Reading up on the history of the regulations and their current status can help alleviate some of the confusion surrounding their mandates and implementation. Knowing whether or not your advisor adheres to both the old and new potential requirements can make a world of difference, and ultimately, provide some long-overdue peace of mind.


Ask your financial service advisors: Are you a fiduciary to our plan? Document not only the question, but also the response. The failure to at least pose this question could potentially be deemed a breach, triggering other implications.

Check SEC Registration

An important indicator of whether those providing investment advice to your plan is a true fiduciary—again, acting in clients’ best interests and not their own best interests—is if they’re a U.S. Securities and Exchange Commission-registered investment advisor (RIA). While other types of financial services providers may also have a fiduciary duty, this distinction will more clearly identify those with a fiduciary responsibility to their clients.

Retain an ERISA Attorney

Consulting with an attorney well-versed in ERISA to vet new contracts and review your plan and advisor relationships will help ensure compliance and add an additional layer of checks and balances to what has to date been described as an often confusing process.

Examine Fees

It could be helpful for plan sponsors—or the aforementioned ERISA attorneys—to review the fees charged by those providing financial advice, and ensure they’re valid and reasonable. Researching the purpose and amounts of these fees could possibly identify conflicts and non-compliancy issues, as well provide valuable guidance moving forward.

Reassess Pay Structures

A fiduciary standard may influence advisors to alter their fee structures for certain services. For example, those operating on a commission or mutual fund revenue-sharing basis may change to percentage-of-assets or flat-dollar fee models. This could also mean that firms administering workplace retirement plans may end any so-called no-cost investment advice provisions possibly bundled together with other services as part of larger package offerings. Enlisting the help of a fee-based retirement plan consultant and/or a “level fee fiduciary” advisory firm for investment management purposes can help avoid many of the major conflicts of interest associated with commission-based advisors.

Know About the Best Interest Contract Exemption

A best interest contract exemption (BICE) permits those providing advice to individual plan participants and sponsors of smaller plans to continue using certain compensation arrangements otherwise possibly forbidden as long as they put their clients’ best interests first, among other stipulations. BICE also requires the disclosure of conflicts of interest that could potentially affect their best judgement while operating in a fiduciary capacity.

Recognize Rollovers

Under the DOL’s set of rules, the recommendation of a distribution or rollover to an IRA could be considered a fiduciary act, thus it would significantly affect those from 401(k)s and other defined contribution plans. One potential consequence could be the discontinuation of such advice by advisors fearful of triggering associated fiduciary obligations. Whether or not such a rule is fully implemented by the DOL or another regulatory body like the SEC, plan sponsors will benefit from conducting a thorough review themselves, or preferably partner with an advisory firm that has a knowledge of adherence to such fiduciary responsibilities.


Partner with an Advisory Firm That Takes Its Fiduciary Obligations Seriously, Such as 4Thought Financial Group.

New York-based financial planning and wealth management firm 4Thought Financial Group has been a “Level Fee Fiduciary” Registered Investment Adviser (RIA) long before there was even any talk of proposed changes to the DOL’s Fiduciary Rule, and has always been mandated to put its clients’ best financial interests first.

Partnering with 4Thought Financial Group helps to comply with any possible regulatory updates and changes underway, shifts much of the fiduciary burden off plan sponsors’ shoulders, and provides more resources to help plan participants achieve their personal financial goals.

4Thought Financial Group’s Retirement Plan Services include Defined Contribution and Defined Benefit Plans, and utilize the firm’s specialty: formulaic, data-driven strategies and managed account investment options that can better align plans’ investments with individualized participant objectives.


Learn more about 4Thought Financial Group’s Retirement Plan Services, the many benefits of switching today & Download a free ‘401(k) Plan Sponsor Information’ kit Today!

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