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.
Tag "401k"
“As far as adopting employers, I would recommend an ERISA attorney because an MEP isn’t the right fit and fiduciary solution for every plan sponsor.”
Including these will make 401k plans safer for plan sponsors and more successful for plan participants.
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.
It’s important to remember that the 401k MEP is just a vehicle. Whether they truly meet the objective of employees saving more for retirement and doing so effectively and efficiently comes down to execution.
Perhaps, just as plan sponsors have developed onboarding programs for new hires when it comes to saving for retirement, maybe they should add “unboarding” programs as a bookend for those nearing retirement.
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?
It appears all but certain the floodgates will soon open wide, unleashing a torrent of trade association sponsored 401k MEPs. If you’re looking for the trigger that will open those floodgates, here’s what you should be paying attention to.
