Larry E. Crocker

Fiduciary Consulting Group Inc. was founded early in the millennium as a resource that plan sponsors, committee members, plan fiduciaries, trustees and others could use to better learn about their fiduciary responsibilities and to help them offload some of those. Located in Murfreesboro, Tennessee, the firm offers independent fiduciary management and oversight and supports plan advisers looking to ensure the operational compliance of their clients’ retirement plans. Managing Editor Judy Faust Hartnett chatted with Larry E. Crocker, the firm’s founder, about 3(16) trends.

PLANADVISER: I understand that FCG focuses on fiduciary and operational compliance and not on investments. Could you describe the business model of your practice?

Larry Crocker: Our focus is on the key fiduciary areas of plan administrative, operational and regulatory compliance. We’ve found these areas generally receive the least attention by plan sponsors yet can be the source of the greatest risks to employers. Our goal is to provide either compliance consulting and oversight or total outsourced plan management, depending on each client’s specific needs. This permits the plan sponsor and fiduciaries to focus on what they do best, while also enabling the plan adviser to focus on core competencies.

PA: Many advisers are familiar with investment fiduciary status, as defined in Sections 3(21) and 3(38) of the Employee Retirement Income Security Act. Lately, there’s been much discussion about ERISA Section 3(16). What is a 3(16) fiduciary service provider?

Crocker: Some TPAs [third-party administrators], recordkeepers, advisers, etc., offer what are referred to as “3(16) fiduciary services” or “administrative fiduciary services” or “fiduciary fulfillment services.” Some other independent firms, such as Fiduciary Consulting Group, provide broader fiduciary outsourcing.

TPAs, recordkeepers and advisers generally don’t serve as the plan administrator, as identified in ERISA Section 3(16). They also generally don’t serve as the named fiduciary, as identified in ERISA Section 402(a). However, many service providers do offer relief to plan fiduciaries for certain or specific administrative tasks such as processing plan withdrawals, distributions, and required notices and disclosures. Plan fiduciaries and advisers should fully understand the scope of services when a service provider agrees to accept a fiduciary role of any level.

A service provider offering to be the plan administrator and the named fiduciary generally creates a conflict of interest and unforeseen residual responsibilities for the plan sponsor. While some providers obscure the conflict by setting up a separate entity to offer their “fiduciary services,” other providers are more straightforward to clearly state the limited scope of their responsibility.

A service provider offering to be the plan administrator and the named fiduciary generally creates a conflict of interest and unforeseen residual responsibilities for the plan sponsor.

PA: As advisers support plan sponsors that may be interested in offloading some of these administrative duties, what role can they play? Is this evaluation different from that of other plan service providers?

Crocker: As mentioned, it’s prudent for sponsors to consider outsourcing tasks and responsibilities that fall outside their core competencies. It’s also good for the plan sponsor to engage a firm that is independent of the plan’s service providers, thus demonstrating a greater sense of accountability, assuming the sponsor is looking for a broad outsourced solution.

When reviewing service agreements with traditional service providers or independent firms, plan fiduciaries and plan advisers should focus on the following key items: 1) the ERISA fiduciary roles being accepted; 2) duties and responsibilities being accepted; and 3) duties and responsibilities being retained by the plan sponsor and plan fiduciaries.

This is easier said than done, due to the way some agreements are written. If it has a list of responsibilities the “fiduciary” is willing to take on, then it’s generally accepted that the sponsor is responsible for everything else. Many sponsors need help with their internal controls and processes, but this is generally not included in outsourced fiduciary firms’ duties. In many cases, the list is short and specific and targets certain administrative tasks, some of which have been mentioned. In other cases, the list can be extensive, which is better for the sponsor. Understanding what remains the sponsor’s responsibility can be challenging.