Retirement plan mergers have changed the face of the 401(k) market, and not necessarily in favor of business owners.
There were once a small number of big names in retirement, leading players who were record keepers for thousands of companies and millions of employees: Prudential, Mass Mutual, Wells Fargo, Fifth Third Bank, New York Life, SunTrust, and so on.
Today, they are no longer in the 401(k) business.
In addition, the retirement plan advisor market has seen its own share of mergers and acquisitions. Aggregators such as CAPTRUST, OneDigital, SageView, and others have bought the businesses of hundreds of smaller advisors.
This has caused many small business owners to, as a result of such deals, take on the role of fiduciary for their firm’s 401(k) plan. That is, become legally responsible for the ultimate outcomes of employees’ retirements.
It can be a big challenge. Your employees will be working with a team of providers you did not choose.
The trusted partners you originally hired likely are not your contacts going forward. Unhappy former employees might sue in the future if their investments don’t return what they expected.
Questions business owners should ask
The profound changes from all these retirement plan mergers give any business owner pause.
Our suggestion is to conduct your own due diligence on each relationship.
The Department of Labor, for instance, has outlined the responsibilities of the business owner with regards to their company’s 401(k) plan. Some of the items you should consider are:
- If you hire a third-party service provider, did you consider whether their fees are reasonable for the services provided?
- Have you documented the hiring process? Are you prepared to monitor your 401(k) plan’s service providers?
- Have you identified parties of interest to the plan and taken steps to monitor transactions with them?
- Are you aware of the major exemptions under the Employee Retirement Income Security Act (ERISA) that permit transactions, such as making 401(k) plan loans to employees?
Do you find yourself unsure of what these questions even mean for a business owner?
If so, and if you have not looked at your current retirement partners in a while, it’s past time to do so. Don’t get caught unaware of the impact of retirement plan mergers and such big changes in how retirement works.
A good retirement partner can help you improve results and reduce your own potential future legal exposure. Schedule a call with Rebalance to discuss your company’s 401(k) plan offering.