Many plan sponsors hire consultants to provide expert advice for Employee Benefit Plans. Because plan sponsors are ultimately responsible for all plan decisions, it’s important to fully understand a consultant’s qualifications. In addition, sponsors need to be aware of potential conflicts of interest. Here is a list of guidelines, summarized from an article by the Department of Labor.
- Ask advisors if they are registered with the SEC or a state securities regulator, and have them provide appropriate disclosures.
- Have advisors describe relationships with the money managers they use for making plan recommendations.
- Find out if the consultant receives payments from money managers for recommendations.
- Request written policies or procedures that address the issue of conflicts of interest when providing advice to clients.
- Implement a system to track commissions and fees paid to ensure that over-payment does not occur.
- Ask consultants to agree in writing that they are acting as a fiduciary for the designated plan.
- Ask consultants about their arrangements with other clients to evaluate the objectivity of their recommendations.
Protecting yourself and your company will keep you in good standing with the Employee Retirement Income Security Act (ERISA) and the Department of Labor.