The DOL’s Advisory Opinion process is a helpful one, as it provides a manner in which to explore and test the development of innovative programs which are necessary for the retirement system to properly adapt and change.
One of the Advisory Opinions issued today is a case in point. A continuing challenge in the marketplace (and, generally, for policymakers) is how to effectively increase small employer sponsorship of retirement plans in a manner which protects plan participants. In one of the MEPs opined upon, the average size of participants for each employer is small, yet those plan accounts are still subject to an audit (to which they would otherwise not be subject) under ERISA’s audit rules. Plan participants are given access to a level of individual retirement advisory services that are typically only available to the very largest 401(k) plans; these small employers are not subject to the proprietary investment fund requirements typically imposed on plans of this size; there are processes in place which monitor the employers timely deposit of elective deferrals; and, of course, the cost and variety of investments are at a level which is substantially more favorable than a small plan sponsor could get on its own. Nearly half of the adopting employers were start-ups, which most vendors for single employer plans actively avoid (shall I say like the plague?).
It is worth noting that this particular MEP is actually based upon accountability and participant protections, and does not relieve adopting employers from their fiduciary obligations related to the plan. It specifically demands such obligations.
In short, arrangements which safely increase small employer coverage; promote fiduciary compliance and accountability by such employers; control costs for employers; while providing plan participants a wide selection of reasonably priced investments is critical to promoting retirement security.
Unfortunately, there will always be “bad actors” which abuse the system. Working together with regulatory agencies, we can address the “bad actor” challenge while further enhancing the structure for a sound, secure and cost effective platform for the small employer sponsored retirement plan.
We look forward to continuing these efforts.