Here are five regulatory worries for those on the front lines: the professionals who devote their careers to helping improve the retirement prospects of others.
Compliance
Should the platform offer ESG doesn’t necessarily mean good news for the 401k plan sponsor. Including ESG funds might introduce other risks.
If you’re a fiduciary of the acquiring plan, you want to make sure you’re not burdened with any unknown liabilities. If you’re a fiduciary of the acquired plan, you want to make sure the merger process doesn’t introduce new liabilities.
If you think the web of fiduciary duties is complex in a 401k plan that focuses on getting employees to save for retirement, imagine how much more intricate it becomes if the plan also has to cater to retired employees.
In a nutshell, what was initially considered a “pick me because you like me” decision on the part of the prospect has been reframed as a “pick me because I sold you investments” decision. It’s a subtle distinction, but it drives the difference between a fiduciary act and a non-fiduciary act.
Although the Rule appears to be directed primarily at service providers, plan sponsors still have a fiduciary duty to monitor plan compliance, and that includes complying with the demands of this new rule.
Thoughtleaders with the veteran experience to sift through the noise and separate the wheat of solid trends from the chaff of tiresome fads. Accurately discerning between the two can mean the difference between long-term sustainability and irretrievably sunk costs.
The mistaken promise of participation may have an all-too-familiar ring to corporate retirement plan veterans.
In the end, this all comes down to one final concern, and it’s one that is typically not even considered.
This has long been demanded of fiduciaries. Nearly two centuries ago in Harvard College v. Amory, the Massachusetts court promulgated what has become known as the “prudent man rule.”
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