Thought this article from Plan 401K|Safe was very interested.
"One of the unintended consequences of the new fiduciary standard is that as fiduciaries, advisors will be in the difficult position of having a legal responsibility to report a client who has committed a fiduciary violation to the DOL.
When administrative errors are found, in many cases, if employers are following the rules they are responsible for making corrective contributions retroactively from when the error occurred. These penalties can often run into thousands of dollars, and we frequently hear of employers willing to “roll the dice” and take their chances on not getting audited. In the current environment, though not prudent, it's probably not a problem. The plan vendors are not fiduciaries and will in most cases not report the violation to the DOL. But in the new fiduciary environment, if the advisor has knowledge of this he or she will have to report the violation to avoid serious consequences.
I know many advisors who have expressed frustration that a client refuses to execute on their most basic fiduciary role of reviewing expenses and documenting the prudent process they followed to evaluate plan costs were reasonable. In the new environment, if an advisor takes over a small plan and it grows over time to a larger plan, if the employer refuses to review and monitor the expenses, again the advisor must report a fiduciary breach."
Best
Jeff London
I do think advisors can minimize this risk by reevaluating the way they currently set up their plans. The current practice of simply choosing a record keeper, a TPA, and a 3(21) or 3(38) investment fiduciary is going to be a risky proposition for advisors. Since the vast majority of fiduciary breaches are operational in nature, combining a 3(16) administrative fiduciary and an active trustee provide advisors and their clients a comprehensive solution to execute on the operational fiduciary roles once the plan document is signed. By adding these fiduciaries the advisor has a team that can work to keep their clients safe while also shielding their clients from a time-consuming task that doesn’t increase their revenues or profitability.
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Jeffrey London VFP, CRPC
J.S. London Advisors
East Meadow NY
516-867-6478
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