When businesses offer a 401(k) or nonprofits provide a 403(b) plan, they give employees the opportunity to save for a secure retirement. This also enhances employee retention and makes the organization more appealing to prospective talent. However, for many plan sponsors, overseeing such plans and managing the responsibilities that come with them can be overwhelming. This is where financial advisors step in to provide crucial support.

1. Selecting and Monitoring Investments

Under ERISA, plan sponsors must prudently select and monitor investments. Financial advisors help choose and regularly review investment options that meet employees’ needs while keeping expenses reasonable.

2. Evaluating and Selecting Recordkeepers

Advisors assist in choosing recordkeepers by assessing their technology, service, and fees. They ensure that the selected provider aligns with the organization’s goals and budget, improving plan efficiency.

3. Fee Benchmarking

Advisors regularly benchmark plan fees, comparing them to similar-sized plans in the market. They negotiate with providers to ensure fees are reasonable, helping sponsors meet fiduciary responsibilities.

4. Designing an Investment Policy Statement (IPS)

Financial advisors assist in drafting an IPS, which serves as a roadmap for managing the plan’s investments. A clear IPS ensures consistent decision-making and provides legal protection for plan sponsors.

5. Providing Fiduciary Support

Financial advisors act as co-fiduciaries, sharing the responsibility of managing the plan and ensuring compliance. Their expertise reduces legal risks for sponsors while safeguarding employees’ retirement funds.

6. Employee Education and Support

Advisors also help educate employees, making it easier for them to enroll and manage their retirement accounts. They answer questions on contributions, investments, and rollovers, enhancing participation and retirement outcomes.

7. Bonus: Fixing Mistakes

If something goes sideways or if there’s a mistake with the 401(k) or 403(b) plan, a financial advisor doesn’t disappear. They stay involved and work closely with retirement plan specialists, such as NESA, to quickly address and resolve the issue.

Final Words

Financial advisors are essential partners in managing 401(k) and 403(b) plans. They simplify investments, control fees, and provide vital employee education and fiduciary support. With their guidance, plan sponsors can focus on their business, knowing their employees’ financial futures are in good hands.