Unlike a generic vendor agreement, the IPS is a formal plan policy document that defines the parameters between the plan and relevant vendors. This is why it can also be a terrible trap.
Compliance
Whether a plan sponsor decides to adopt a 401k IPS remains an open question. It’s not a question that should be treated casually. Every plan situation is different. Plan sponsors therefore must conduct a thorough due diligence to determine what’s best for their plan.
Although we’ve seen a broader acceptance of using an IPS, their use is by no means universal and particularly lacking among smaller employers. Perhaps there’s a realization that, if you don’t get the IPS right, you’ll only increase your liability.
When you’re not an expert in an important job that you need done, what do you do?
MEPs have the potential to do what state-sponsored plans may not be able to offer – protection under ERISA. That’s in the employees’ best interests. If many embrace this concept, September 30, 2019 may indeed signal the dawn of a new day in retirement saving. Still, due diligence remains an imperative.
Just as summer changes into fall, Reg BI will change the way all participants – investors, service providers, and 401k plan sponsors – interact with each other. These are the changes we might expect.
As we approach clarity with regards to Congressional action and/or implementation of the Trump Executive Order, we may find need to expand these MEP guidelines. Until then, though, companies in business associations where commonality exists may wish to use these ground rules when determining if a 401k MEP is the right course to take.
“In 5 years, I think investors will be considerably worse off if SEC does go forward with its proposals without substantial change.”
Still, if one has confidence the marketplace will drive the industry towards focusing on the best interests of clients, then a de facto fiduciary standard can emerge organically, without overt reliance on regulators.
We asked financial professionals across the nation for their thoughts on the SEC’s effort. As you might imagine, it’s clear Regulation Best Interest has some good points and some not-so-good points.
