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Are You Shouldering Too Much Responsibility in Your Retirement Plan?

August 30, 2021

By John G. Rogers, Institutional Consultant, Graystone Consulting, a business of Morgan Stanley

As a small-business owner, you have a lot on your plate beyond managing and growing your business. You know it’s important to offer your employees a retirement program to help them save for the future. You also know a high-quality retirement plan can help attract and retain valuable talent as your business continues to grow. But administering an effective plan is complex, especially knowing regulatory requirements make it your responsibility — as the fiduciary of the plan—to monitor and select the investment options within the plan.

Unlike larger companies that have extensive resources to help manage the administration and fiduciary exposure underlying their 401(k) plans, your resources and time to focus on these important responsibilities are limited. Yet, despite these constricts, you still have the same regulatory obligations as larger organizations. We take the plan’s regulatory burdens off your shoulders and on to ours, so you can stay focused on building your business.

Morgan Stanley is here to help.
At Morgan Stanley, we have developed a platform specifically designed for small-business owners. Our program bears the investment fiduciary responsibilities for your plan. We also provide access to our Global Investment Manager Analysis (GIMA) team. This group of 70+ experience analysts covers over 2300 investment products. In the past, GIMA was only available to large, institutional clients; but through our platform, you have access to top thought leaders of our firm. Morgan Stanley delivers a boutique client experience coupled with the resources of a global leader. With a focus on the best interests of you and your employees, we apply our deep knowledge, experience and extensive resources to deliver world-class investment solutions while assuming considerable fiduciary responsibilities for the selection and monitoring of your plan’s investments.

By offering a retirement plan, you’ve taken a critical step to helping your employees prepare for a more secure future. With this decision, however, come important duties. Management of the plan must be performed up to the fiduciary standards under the Employee Retirement Income Security Act of 1974, as amended (ERISA).

Traditionally, many business owners have chosen an “ERISA 3(21)” Investment Advice fiduciary, in which the plan sponsor hires a fiduciary to provide it with investment advice in exchange for a fee. With an ERISA 3(21) Investment Advice fiduciary, the employer is ultimately held accountable for the investment decisions of the plan, including the selection of the plan’s investment options.
Today, many small-business owners are taking a closer look at a plan with an “ERISA 3(38)” Investment Manager, due to heightened awareness of fiduciary responsibilities as a result of recent developments, both regulatory and under emerging case law, regarding the selection and monitoring of investment options and associated plan fees. Under a plan with an “ERISA 3(38)” Investment Manager, the plan sponsor hires a fiduciary as an investment manager, responsible for managing the assets of the plan. The employer is held accountable for choosing and monitoring the investment manager but is not liable for the investment decisions made by the investment manager.

A Plan With No Investment Advice Assistance

Liability: You are liable for plan investments.
Investment Selection: You remain responsible for making updates to your plan’s investment menu.

A Plan With ERISA 3(21) Investment Advice Fiduciary

Liability: You and another fiduciary each have liability for plan investments.
Investment Selection: You receive advice from an investment manager that has fiduciary responsibility but still remain responsible for making updates to your plan’s investment menu.

A Plan With an ERISA 3(38) Investment Manager

Liability: Morgan Stanley assumes full liability for plan investments.
Investment Selection: Morgan Stanley acts as an investment manager and will make ongoing updates to your plan’s investment menu, as needed.

Morgan Stanley acts as an investment manager and will make ongoing updates to your plan’s investment menu, as needed. Visit www.sbam.org/retirement for more details.

John G. Rogers is an Institutional Consultant and Investing with Impact Director with Graystone Consulting – Farmington Hills, a business of Morgan Stanley. He leads the groups’ Morgan Stanley at Work financial wellness program and its mission and impact investing initiatives. John graduated from Northwestern University in 2012 with a Bachelors of Arts Degree in History, a minor in Business Institutions and a Certificate in Leadership.

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