Should the platform offer ESG doesn’t necessarily mean good news for the 401k plan sponsor. Including ESG funds might introduce other risks.
Tag "3(38)"
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.
Clearly, you wouldn’t pay more for 2 apples if you could get 3 for the same price, but would you pay more to get 2 oranges instead?
Familiarity may breed contempt, but it also makes you sloppy. Do you know plan sponsors that have forgotten they need to address these matters?
Here things get a little familiar for companies with pre-existing stand-alone 401k plans (but may need to be discovered by those without plans).
If plan sponsors assume things can return to the pre-Covid normal, they risk exasperating existing problems. They’re there and cannot be ignored.
Nonetheless, there is a way to short-circuit this time-frame. You can do it, but you’ve got to really want to do it.
One of the biggest risks inherent in MEPs/PEPs is coordinating all of the many moving pieces. Here’s why people might be wrong to think they know enough about assembling a 401k MEP/PEP and regulatory compliance only heightens the potential liability.
There are many different types of plans, particularly when plan sponsors pick a 3(21) or 3(38) adviser. Which service provider arrangement a plan sponsor chooses impacts how the IPS will be constructed – and how the relevant parties contribute to that draft.
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.
