Very few know of my acting pursuits; it’s a hobby I enjoy, but is quite challenging. I remember my first role in a small budget independent film. That first day of filming gave me a great appreciation for professional actors. I spent hours studying my lines and practicing my expressions, but when the camera came on, I pulled a “Ricky Bobby” from the movie Talladega Nights. I stood frozen and confused in front of the camera asking, “What do I do with my hands?” In my role as Director of Participant Services, this is a feeling I imagine countless professionals who serve as fiduciaries to their retirement plans experience as well. What exactly do I do?

Most retirement plan fiduciaries don’t have the best understanding of their roles. Some, if asked, may freeze up like Ricky Bobby, unsure of their definitive responsibilities. Fortunately, many others follow the direction of their service providers, have good intentions for providing a benefit to their employees, and are open to learning as much as they can.

Let’s start with the different plan roles: Plan Sponsor, Plan Trustee, and Plan Administrator. For small plans, you may assume all three roles. These roles require you to act as a fiduciary to your retirement plan, meaning you are liable if something should go wrong. This is a heavy responsibility; you want to make sure you have the proper support and understanding to ensure you don’t disqualify your plan, incur unnecessary fines, or worst of all – get sued!

As a Plan Sponsor, you are just that, an employer who sponsors a retirement program for your company, and oversees the management of your plan. You must delegate management responsibilities for your plan by assigning the roles of Trustee and Administrator. These roles could be filled by you alone, other company officers, or could be outsourced to third party providers.

A Plan Trustee oversees the assets of the retirement plan, ensuring the plan does not engage in any prohibitive transactions that would violate the rules of ERISA (Employee Retirement Income Security Act). Certain financial institutions offer “Directed Trustee” services, handling the responsibilities for overseeing the assets. The trustee is also tasked with the responsibility of selecting appropriate investments for their retirement plan. As per section 404(c) of ERISA, the plan should provide participants a choice among at least three investment alternatives which are diversified and have materially different risk and return characteristics. In most cases, the Plan Sponsor will engage a third party, such as an investment manager, to assist with or take on the responsibility of selecting the plan’s investments. If you delegate your responsibility to select investments, ensure the investment manager has proper insurance coverage. There may be different levels of fiduciary liability the investment manager will take on for the client, i.e., full scope 3(38) investment manager, who will select and approve the investments, or a limited scope 3(21) investment adviser, who will make recommendations however, the final say on approving the investments remains with the trustee(s).

Finally, the Plan Administrator. The Plan Administrator is the workhorse of the plan, handling day-to-day management and tasks such as ensuring employees receive proper notifications regarding plan changes and eligibility, submitting employee and employer contributions, maintaining plan documents… and the list goes on! This service can be outsourced to companies who provide 3(16) plan administrative services. It is important to ensure proper liability coverage and confirm the services they are willing to provide.

There is a lot that goes into operating your retirement plan. Knowing what is required of each role can help you make decisions when delegating your responsibilities. As a Plan Sponsor, there are great resources available to you in managing the various roles and responsibilities of your retirement plan. If you would like more information on how RTD may be able to help, please contact me at amira@rtdfinancial.com or (215) 557-3800.