SUMMARY
A truly excellent retirement plan benefits both employees and employer. Regulatory compliance is the baseline of excellence—not the finish line. In this series on “going beyond the regulations,” we cover best practices across six areas:
- Fiduciary Governance
- Plan Design
- Fee Structure
- Investment Process
- Participant Support
- Provider Management
Each entry in the series is anchored by a quick-reference table of best practices. We also share examples drawn from our professional experience with real-world insights and tangible strategies. We invite you to join us as we explore the nuances of creating and maintaining an outstanding retirement plan.
Crafting excellence from the ground up
Fiduciary governance is the cornerstone—the first thing to establish when business owners and executives set out to build an outstanding retirement plan. It sets the stage for all subsequent decision-making, not only for regulatory compliance but for serving the plan's participants to the fullest.
Here are two examples drawn from our own experience working with clients that show how fiduciary governance is the foundation on which everything else is built:
Example 1: Correcting compliance issues
Johnson Financial Group advisors met with a prospective client for whom it’d been more than two years since meeting with their current advisor.
- The JFG advisor discovered several compliance issues that had arisen as a result of inattention and needed to be addressed immediately.
- After engaging with JFG RPS, the JFG advisor collaborated with the client to correct prior compliance violations and outline a strategy to avoid future problems.
- After correction, the JFG advisor meets regularly with client to conduct plan review.
- Ongoing review includes reiterating roles and responsibilities, reviewing plan operations and establishing a calendar for semi-annual plan analysis.
Result: Now adhering to a disciplined meeting schedule, the retirement plan continues to operate smoothly and efficiently with no compliance issues.
Example 2: Resolving fiduciary roles
Upon prospect engagement, JFG advisors reviewed fiduciary governance, which included an identification of all parties involved and their fiduciary responsibilities.
- JFG advisors discovery that the plan laced together both a 3(21) Investment Advisor and 3(38) Investment Manager.
- This fact contrasted with the plan sponsor’s assumption that their current advisor was accepting—and acting in—a fiduciary role in the investment decisions for the plan and acting in the best interest of the plan participants.
- No formal plan review had occurred to discuss the investments and performance. No documentation had been prepared to define investment roles and responsibilities or to reflect research data behind the plan’s investment options. These missing pieces left a large knowledge gap about whether the investments were appropriate for the retirement plan participants.
Result: The plan sponsor engaged JFG RPS to act as 3(38) Investment Manager, which aligned with their desire to limit their liability and the need to make investment decisions. JFG’s documentation outlined clear coverage and responsibilities. JFG advisors met with the plan sponsor on an ongoing regular basis and provided a quarterly report, along with commentary to support JFG’s conviction on the investment options offered in the plan.
Best practices for fiduciary governance that goes beyond the regulations.
Now let’s break down best practices. The following table serves as an introduction to successful fiduciary governance and can help everyone involved understand the relevance of each component.
Establishment of Formal Retirement Plan Committee
What it is:
Structured group with representatives managing the retirement plan.
Why it matters to the business owner:
Ensures systematic plan oversight. Shares responsibility.
Why it matters to the employee:
Employees feel represented in decisions about their retirement.
Committee Charter
What it is:
Document naming a cross-organizational group with specific responsibilities for plan management.
Why it matters to the business owner:
Team members understand their roles. More structured processes. Reduced liability with chartered committee. Group decision vs. individual decision.
Why it matters to the employee:
Diverse perspectives ensure holistic decisions. Employees feel represented. Increased likelihood of plan participation.
Plan Fiduciary Indemnificaiton
What it is:
Legal protection for plan fiduciaries against potential losses.
Why it matters to the business owner:
Protects the assets of the company and individual fiduciaries. Mitigates financial risks.
Why it matters to the employee:
Provides trust that those managing the plan are protected, indicating stability.
ERISA Liability Insurance
What it is:
Insurance that covers fiduciaries against claims for mismanagement.
Why it matters to the business owner:
Protects business assets and individual fiduciaries against claims.
Why it matters to the employee:
Confidence in the protection and longevity of their retirement assets.
3(21) Advisor / 3(38) Investment Manager Role
What it is:
Roles defining the scope of responsibility in advising or making investment decisions.
Why it matters to the business owner:
Determines who has discretion over investment decisions. Assists in compliance and reduces liability.
Why it matters to the employee:
Ensures that investments are professionally managed or advised.
Fiduciary Training for Committee
What it is:
Formal education on roles, responsibilities, and best practices for fiduciaries.
Why it matters to the business owner:
Reduces potential mistakes and compliance issues. Ensures best practices are followed.
Why it matters to the employee:
Ensures that those overseeing the plan are well-informed and capable.
Scheduled Regular Meetings
What it is:
Pre-determined, frequent meetings to discuss and manage the plan.
Why it matters to the business owner:
Ensures timely attention to plan matters. Keeps all involved parties informed.
Why it matters to the employee:
Demonstrates ongoing attention and care to the plan.
Committee Meeting Minutes
What it is:
Documented records of each committee meeting.
Why it matters to the business owner:
Provides a written record, aiding in transparency and accountability.
Why it matters to the employee:
Reinforces trust in plan management transparency.
Maintenance of Fiduciary File
What it is:
Organized collection of essential fiduciary documents and records.
Why it matters to the business owner:
Simplifies audits and reviews. Provides a clear history of decisions and actions.
Why it matters to the employee:
Trust in the thoroughness and transparency of plan management.
Next steps
With solid fiduciary governance in place, the foundation is in place to build the plan itself. Next up in our series on best practices for going beyond the regulations is Plan Design.
ABOUT THE AUTHOR
SVP Director of Retirement Plan Services | Johnson Financial Group
As Senior Vice President, Director of Retirement Plan Services, Ron leads a team of highly experienced financial professionals. Ron’s team believes in thinking differently by taking time to understand what makes each organization unique and developing customized solutions to achieve goals that are meaningful to both the plan sponsor and participants. With over 25 years of experience in the financial services industry, Ron is responsible for positioning his team for sustainable growth while providing an exceptional client experience through competitive product and service offerings.
