Know the Differences in Retirement Plan Regulators or Suffer the Consequences

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This is part two of a two-part series. Part one, A Primer on Retirement Plan Compliance, appeared last week.

When isn’t an investment provider an investment provider? When they are a retirement-plan investment provider. Although they are still operating under SEC and/or FINRA, they also need to take into consideration ERISA and understand who they are and what they do. Being out of compliance can harm you, your plan-sponsor clients and even the participants.

I first encountered this years ago with a RIA/BD hybrid whose outside compliance officer contacted my firm because she recognized there could be differences and wanted some help. What we found was that even though their standard investment procedures, polices and mindset were compliance-minded, when it came to retirement plans, there were gaps that could harm them and their plan sponsor clients with the Department of Labor. As we met with other compliance and investment professionals, we found the same types of ERISA regulation non-compliance even though their SEC/FINRA compliance was sound.

Here are some of the differences I have seen with my clients and through my own experience:

1. With whom is the contract and who signs it?

Make sure the retirement plan contract is between the plan and the investment provider, and the appropriate person has signing authority to do so. I had a consulting client who executed an agreement between the plan-sponsor entity and the investment provider. This plan-sponsor entity individual signed the contract and they were not a designated signer for the plan.