Got five minutes? The topic of this blog post is covered in our Fiduciary Five Podcast series hosted by Chuck Hammond of the 401(k) Study Group. The Fiduciary Five Podcast…your fiduciary questions, answered in about five minutes. To listen to the related podcast, click here.
A few years ago, the company Lifelock created a commercial about a bank robbery. The commercial starts with the robbers entering the bank and then everyone goes to the floor. It then pans over to a “Security Guard” standing in the middle of the crowd and a woman lying on the floor says “Hey do something”. The assumed “Security Guard” responds by saying, “Oh I am not a Security Guard, I’m a Security Monitor….I only notify people if there is a robbery…then pauses and says, “There’s a Robbery.”
I found this commercial very relatable to the retirement plan industry. Many plan sponsors believe they have hired “Security Guards” who will protect them and the plan. However, many cases, they actually hired Security Monitors which means that 100% of the liability is still on them as the Named Plan Fiduciary. While plan sponsors are becoming more aware of who is a fiduciary, many still don’t understand the full scope of their roles and responsibilities. This often leads them to believe they have full protection by their providers and advisors.
According to a PIMCO Survey last year, one of the most important factors to plan sponsors was managing litigation. Plan sponsors are looking to hire retirement specialists to assist or fulfill some of their fiduciary duties and on-going responsibilities. This could be outsourcing trustee responsibilities, plan administrative duties, investment selection monitoring and replacement, on-going fiduciary training & education and data security. Some advisors that specialize in retirement plans are making it part of their annual meetings to deliver fiduciary education. They work with the individuals in fiduciary roles to discuss best practices, helping with internal processes and procedures to reduce liability and exposure.
We have all heard the saying, you go where the money is, and that holds very true for criminals. With over $27 trillion assets in the retirement industry and the increase in digital crimes, cyber security is becoming a key topic of discussion. The Equifax breach was an example of a cyber security breach with the key takeaways being to know that your systems and that computer scans aren’t enough. Plan sponsors and their advisors will need to incorporate cyber security guards for the protection of plan and participant information. The need for digital security and digital fiduciaries will be the next steps for plan sponsors and their retirement programs.
As we continue to see the evolution of the retirement plan industry and the additional need for cyber security, plan sponsors and their advisors will need to include further security measures regarding their fiduciary responsibilities to help ensure the protection of plan and participant information. We have already seen advisors incorporating questions regarding cyber security in RFP’s along with including some additional procedures should a breach occur.
As a discretionary trustee, Unified Trust is held to a higher standard than other outsourced fiduciary service providers. As a Named Fiduciary in the plan document, we must always follow the ERISA prudent expert rule and maintain well-documented records. As a national bank trust company with expertise in ERISA retirement plans, we offer one of the highest protections and safety measures that only a bank could offer. Our ultimate goal as a discretionary trustee is to improve participant outcomes and maximize fiduciary protection for plan sponsors.