PRM Consulting Group

Why the 403(b) Community Needs Consulting Help

Institutions that sponsor 403(b) retirement plans are always on the edge of regulatory and ERISA compliance. Administrators who implement these plans typically find themselves overwhelmed with the rules needed to keep their plans in shape, and may ignore their ERISA responsibilities of managing the plan under the “duty to monitor” role. How? And what does this mean for your organization?

  • 403(b) investment costs are generally higher when compared to the 401(k) market. However, institutions often do very little to compare vendor costs or change vendors to reduce fees. Who suffers when this important process is ignored? Employees.
  • Many 403(b) institutions have more than one vendor, while typical 401(k) plans have only one vendor. This practice opens opportunities for administrative burdens, inconsistency in plan operations, no coordination of rules, inconsistent delivery of service, and poor communication. Who suffers? Employees.
  • Some 403(b) vendors charge fees to participate in the plan, transfer assets, or withdraw accumulations from the plan. These charges create an inflexible service model. These fees can be as high as 10% of the account value. Who suffers? Employees.
  • Fund fees play a huge role as expense ratios on vested assets for participants can range anywhere from .25% to 3.5% of investment expenses and higher. These fees affect employee returns and create reduced savings as a 1% fee savings on a $5,000 annual contribution for 25 years equals about $60,000 over the same period. Without the plan sponsor monitoring expenses, who suffers? You get the point.

The Solution

Plan sponsors have benefited from hiring PRM Consulting Group, Inc. (PRM) as we have helped clients save money through various methods, including the reduction of fees, while enhancing plan services. The PRM 403(b) Audit Solutions Tool Kit helps plan sponsors address ERISA and IRS regulations, thus allowing a win-win scenario for both the plan sponsors and employees. One area in particular that has benefited clients is PRM’s work in evaluating financial services firms through the construct of vendor searches. Such projects have resulted in negotiated reduction of fees up to 40% for some clients, while increasing service levels and employee communication. Our approach in this area includes:  
  • Evaluating the existing plan to determine cost and design implications (if any);
  • Engaging a plan sponsor to identify a “wish list” of services offered by the vendor;
  • Creating a customized RFP;
  • Reviewing vendor services including fees, employee education, investment options, vendor experience, local presence, web services, employee communication, proprietary and non-proprietary funds, and much more;
  • Recommending finalists to plan sponsor based on a thorough vetting process; and
  • Working with plan sponsor and client to integrate the vendor into the plan.
In some instances, this evaluation process may result in the retention of the existing vendor. As long as there is a documented process and the plan sponsor has engaged an independent firm to conduct the analysis, the plan sponsor’s fiduciary duty to monitor has been satisfied. Don’t try to go it alone. PRM can add more value to the process based on our years of experience working with clients to address their retirement needs. 

PRM 403(b) Audit Solutions Tool Kit

At PRM, we create standards of excellence for clients' retirement needs. We do this two ways: 1) carefully assessing the needs of clients and 2) matching our services to fill those needs. As the IRS has increased its auditing of 403(b) plans, we have been providing solutions to assist clients to help them allay any concerns over being audited. Our 403(b) Audit Solutions Tool Kit includes the following services:  
  • Non-discrimination testing of employer sponsored plans;
  • Analysis of plan operation compared to plan document policies;
  • Review of plan communication material including Salary Reduction Agreements and Summary Annual Reports;
  • Compliance testing of IRS limits against all plan participants;
  • Review and creation of plan procedures monitoring vendor activities and complaints;
  • Evaluation of coordination of benefits between vendors;
  • Analysis of investment options;
  • Assessment of plan fees;
  • Review or creation of investment policy statement;
  • Analysis of fiduciary responsibilities; and
  • Introduction of the MEP 403(b) Solution, which eliminates client fiduciary and Form 5500 responsibilities.
Given the current regulatory climate, every plan sponsor should be using these services. An audit failure can result in the plan losing its tax status and nothing good emanates from that process.

Contact Us

If you want like to find out more about 403(b) regulations and how they affect you, or how partnering with PRM can make your plan a best practice, please click here or go to our Contact page.

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