ERISA Advisory Council Recognizes Growing Importance of Employee Benefit Outsourcing Services
The recently issued 2014 Issue Statement for the ERISA Advisory Council of the U.S. Department of Labor recognizes for the first time governmental interest in the growing importance of employee benefit plan outsourcing of fiduciary and non-fiduciary responsibilities by plan sponsors.
I have blogged a great deal on this topic over the past year, in particular in the area of 401(k) plan outsourcing, and I welcome the Council’s interest in a topic that is likely to have broad implications for the benefit plan industry in the coming years.
The Council says that it intends to draft recommendations to the Secretary of Labor for consideration that will focus on:
My previous blogs on the topic: How Can 401(k) Advisers Use 3(16) Administrators to Advance Their Practices; Are 3(16) Plan Administrator Arrangements a Sham?; The 401(k) Plan Sponsor Capability Gap—Hearing the Buzz; 3(16) Plan Administrator Arrangements – Turning Gold into Platinum; and A Proposed Code of Conduct for 3(16) Plan Administrators.
For a deeper dive into the topic and plan sponsor fiduciary responsibilities in general, you may want to read my new book, A Guide To ERISA Fiduciary Responsibilities – For Advisors and Sponsors of 401(k), 403(b), and Profit Sharing Plans.
The recently issued 2014 Issue Statement for the ERISA Advisory Council of the U.S. Department of Labor recognizes for the first time governmental interest in the growing importance of employee benefit plan outsourcing of fiduciary and non-fiduciary responsibilities by plan sponsors.
I have blogged a great deal on this topic over the past year, in particular in the area of 401(k) plan outsourcing, and I welcome the Council’s interest in a topic that is likely to have broad implications for the benefit plan industry in the coming years.
The Council says that it intends to draft recommendations to the Secretary of Labor for consideration that will focus on:
- Identifying current industry practices and trends regarding the types of services being outsourced (both fiduciary and non-fiduciary) and the market for delivery of those services, including differences in outsourcing practices by type of provider, plan size or plan type;
- Clarifying the legal framework under ERISA for retaining outsourced service providers, including both plan sponsor and service provider responsibilities, and suggest areas where further DOL guidance might be helpful;
- Making recommendations to DOL about current best practices in selecting and monitoring outsourced service providers, including identification of performance standards, benchmarking of costs and mitigating conflicts of interest;
- For fiduciary services, exploring the differences between status as a fiduciary under ERISA section 3(16), 3(21) and ERISA section 3(38) and the scope of co-fiduciary liability in the outsourcing context;
- Identifying current contracting practices with respect to outsourced services, including provisions such as termination rights, indemnification, liability caps, service level agreements, etc. that might assist plan sponsors and other fiduciaries in negotiating service agreements;
- Examining insurance coverage and ERISA bonding practices of outsourced service providers to assist in understanding the extent to which risks are shifted from plan sponsors and other fiduciaries to service providers.
My previous blogs on the topic: How Can 401(k) Advisers Use 3(16) Administrators to Advance Their Practices; Are 3(16) Plan Administrator Arrangements a Sham?; The 401(k) Plan Sponsor Capability Gap—Hearing the Buzz; 3(16) Plan Administrator Arrangements – Turning Gold into Platinum; and A Proposed Code of Conduct for 3(16) Plan Administrators.
For a deeper dive into the topic and plan sponsor fiduciary responsibilities in general, you may want to read my new book, A Guide To ERISA Fiduciary Responsibilities – For Advisors and Sponsors of 401(k), 403(b), and Profit Sharing Plans.