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3 Best Practices for Your Annual Retirement Plan Review

Posted by Carlo Berlingieri on Nov 19, 2019 11:02:00 AM

Retirement plan fiduciaries should meet on an annual basis (if not more frequently) to discuss the plan with outside service providers, including the investment advisor, custodian/trustee, and third-party administrator. In this blog, we’ll discuss the three best practices for your annual retirement plan review and what the focus of these meetings should include.

1. Investment Performance of the Funds in the Plan

The fiduciaries should determine if the funds in the plan are meeting the criteria outlined in the investment policy statement (IPS). Funds that are not meeting your stated criteria should be put on a watch list as outlined in the IPS or possibly removed from the plan, again depending on the IPS. In addition to reviewing fund performance, you’ll want to ensure that the group of funds that are offered in your plan are still meeting the requirements of the IPS.

2. Review the Plan for Specific Compliance Matters

  • Are there any changes required by the Internal Revenue Service (IRS) or Employee Retirement Income Security Act (ERISA) that the plan needs to be amended for?

  • If a custom plan, does the plan need to apply for a new determination letter based on the filing cycle?

  • Have all required communication items been sent to the participants (Summary Annual Report, Summary of Material Modification, and Fee Disclosures to the Participants are possible examples).

3. Evaluate the Current Fee Disclosures From the Plan’s Advisors, Custodian/Trustees, Investment Fees, and Third-Party Administrators

Direct and indirect fees that your plan pays should be evaluated annually for reasonableness. Benchmarking services are available or the plan fiduciaries may decide to perform a request for proposal (RFP) or request for information (RFI). Typically, your audit firm or investment advisor (independent of the plan) can perform benchmarking services to evaluate the fees in the plan. 

Remember, the fees do not have to be the lowest in the industry, but there needs to be documentation in the file that concludes that the fees are reasonable compared to the services that are provided. Another item to consider is that some comparisons of fees are not apples to apples. Calling your associates at other companies and asking them what they pay for their services is not a good indication of what is a reasonable fee. You’ll need to evaluate the different types of plans and all services provided to each plan. A request for information or request for proposal is also an option to evaluate fees. The process can be done by the plan administrator or an outside consultant can be engaged to perform the RFI or RFP on the plan’s behalf.

By meeting with your plan’s fiduciaries, investment advisor, and third-party administrators on an annual basis, you’ll help ensure that you are meeting your fiduciary requirements. More importantly, document the decisions and conclusions by the group. If you have any questions on what should be discussed and documented during the retirement plan review please feel free to contact us.

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Topics: Benefit Plan Advising & Auditing

Carlo Berlingieri

Carlo Berlingieri

Carlo Berlingieri, with over 20 years of experience, is a Vice President in the Assurance and Employee Benefit Plan Groups.