fiduciarystructure

New Approach:  Why its needed.

The majority of vendors are dedicated professionals
performing complex services that are essential to the efficient operation of the plan.  

Many plan sponsors have well-deserved strong relationships with their plan’s vendors.  The modern 401(k) plan would not be possible without their ongoing investment in  record-keeping, compliance and other systems.  ERISA Fiduciary Administrators LLC (“EFA”) does not take the place of the vendors.  Acting as the appointed Plan Administrator, our mission is to manage them to insure that the plan remains in compliance  with the prevailing legal requirements at all times and they receive no more than reasonable fees for their work.

First, we review and analyze every vendor administrative service agreement and fee arrangement.  Here we are focusing on whether the vendor has been engaged to perform only the services required by the plan and that the fees the plan is obligated to pay are within an acceptable range based on benchmarking data for comparable plans.   We also audit the fees collected by the vendor to determine the extent to which, if any, the vendor is receiving revenue sharing payments over and above fees paid directly from the plan and/or plan sponsor and how the vendor is accounting for them.   If this arrangement is not consistent with the terms of the plan’s governing instruments, we raise this issue with the plan sponsor to determine whether, and to what extent, the plan sponsor prefers an alternative arrangement or the plan should be amended in this regard.

Second, we regularly review each vendor’s work product to insure that it is both accurate and timely produced and the vendor is coordinating its services with other vendors, as required for the efficient operation of the plan.  Vendor performance issues that arise, as we perform this essential fiduciary oversight function, may necessitate a change in the vendor’s specific services, a reduction in their fees or a replacement of the vendor altogether, but this is not EFA’s primary objective.

Reliance on a professional independent fiduciary to perform the role of Plan Administrator is a new approach, but it is also an extension of an on-going trend in plan management to out-source the fiduciary responsibilities that cannot be reasonably performed in house.   EFA is an independent fiduciary that accepts the plan sponsor’s delegation of the Plan Administrator’s fiduciary responsibility.  In this capacity, we function solely as the plan administration fiduciary.  We work in concert with, but at all times remain independent from, the plan’s Investment Managers and investment advice fiduciaries, as well as all of the plan’s other fiduciary and non-fiduciary service providers.  We do not make investment decisions or provide investment advice either to the plan sponsor or to the participants.

EFA maintains a strict code of service provider independence.  We do not, and will never, have affiliations with, or accept any form of compensation directly or indirectly from, persons or entities in the investment advice or financial services industry, or entities that otherwise provide services to the plan, e.g. banks, insurance companies, mutual fund companies, third party administrators, consultants, broker-dealers, record-keepers, trustees, etc.