Managing a 401(k) plan involves more than offering retirement benefits—it requires fulfilling fiduciary duties under ERISA (Employee Retirement Income Security Act). Many plan sponsors don’t fully understand these legal responsibilities, putting themselves at risk. That’s where advisors can step in to offer additional value.
By guiding plan fiduciaries through governance, investment oversight, and compliance requirements, advisors help clients meet their obligations while improving plan quality and outcomes. Here’s how:
1. Clarifying Fiduciary Responsibilities
Advisors should first help their clients understand their fiduciary role when it comes to the plan, including the core duties:
- Acting in participants’ best interests
- Exercising prudence
- Diversifying investments
- Following plan documents
- Ensuring fees are reasonable
Providing simple fiduciary training, checklists, or handbooks can boost client awareness and reduce risk.
2. Supporting Investment Oversight
Selecting and monitoring plan investments is one of the most critical fiduciary tasks. Advisors can help by:
- Drafting or updating an Investment Policy Statement (IPS)
- Reviewing fund performance, fees, and suitability
- Recommending cost-effective investment options
Even if acting in a fiduciary capacity (as a 3(21) or 3(38) advisor), all investment decisions should be well-documented.
3. Benchmarking Fees and Service Providers
ERISA requires plan fees to be “reasonable.” Advisors can assist their clients by:
- Benchmarking fees against similar-sized plans
- Running provider comparisons or RFPs
- Helping renegotiate pricing with recordkeepers or TPAs
Regular reviews of provider costs and services can protect sponsors from litigation and unnecessary expense.
4. Establishing Strong Governance Processes
Fiduciary responsibility is ongoing. Advisors can help build good governance habits by:
- Holding periodic plan committee meetings
- Keeping thorough meeting notes
- Maintaining compliance calendars and filing deadlines
A well-structured process gives clients a clear roadmap for staying compliant and prepared for possible audits.
5. Focusing on Participant Outcomes
Fiduciaries aren’t only responsible for the plan—they’re accountable for participant success. Advisors can help improve participant outcomes by:
- Implementing auto-enrollment and auto-escalation
- Providing participant education and one-on-one guidance
- Offering tailored communication to increase engagement
Improved outcomes strengthen a fiduciary’s case that they’re acting in participants’ best interest.
6. Navigating Regulatory Change
With frequent changes like SECURE Act updates, ESG guidance, and pooled employer plan rules, advisors play a vital role in helping clients stay current and compliant.
Keeping clients informed and adaptive adds significant value and positions the advisor as a trusted partner.
Conclusion
Executing fiduciary responsibilities doesn’t have to be overwhelming. With the right advisor, plan sponsors can confidently manage their 401(k) plans, reduce risk, and deliver meaningful retirement benefits to employees.
By focusing on education, process, and outcomes, advisors not only protect their clients—they elevate their retirement plans.
If an advisor finds these responsibilities are too burdensome for a client to carry out, they can partner with American Trust Retirement to provide fiduciary outsourcing services, relieving their client of stress and giving them back their time.