Smarter Plan Design Starts Here: Best Practices and the Power of a 3(16) Fiduciary
As a financial advisor, you play a central role in helping plan sponsors design, implement, and manage retirement plans that deliver real value. A well-designed retirement plan not only supports participant outcomes—it positions you as a strategic partner, enhances client retention, and reduces the risk of costly compliance issues.
In today’s regulatory environment, plan design and fiduciary governance go hand in hand. The more you can eliminate complexity for your clients—while reinforcing your own value—the better positioned you are to grow and scale your retirement plan business.
Elevate your retirement plan business by using industry best practices and integrating 3(16) fiduciary services into your strategy.
- Align Plan Design with Business Goals and Workforce Needs
Your first step with any client should be clarifying their business objectives and workforce demographics. Is the plan meant to attract and retain top talent? Are they trying to help employees retire on time? Maximize owner contributions?
Understanding these goals sets the foundation for every plan design recommendation and positions you as a true consultant—not just an investment provider.
Pro tip: Use benchmarking data to show how your client’s plan compares to industry norms, then tailor design strategies accordingly.
- Streamline Participation with Automatic Features
Modern plan design embraces automation—not only to drive participation and savings, but to help clients meet safe harbor and nondiscrimination requirements more easily.
Key strategies to consider:
- Auto-enrollment at a 6% default rate or higher.
- Auto-escalation features up to 10–15% contribution rate.
- Qualified Default Investment Alternatives (QDIAs) such as target-date funds or managed accounts.
These features improve outcomes and demonstrate that your client is operating in the best interest of participants—a core fiduciary responsibility.
- Leverage a Competitive and Compliant Employer Contribution
Matching contributions continue to be a primary driver of participation and plan engagement. Safe harbor plan designs, in particular, offer both a participant benefit and a compliance advantage.
As an advisor, you can recommend matching formulas that maximize value for both the employer and employees—while reducing the plan’s exposure to nondiscrimination testing issues.
- Offer Plan Flexibility Without Overcomplicating
Balancing flexibility with simplicity is key. You want to ensure the plan can meet a range of employee needs while remaining administratively manageable for the employer.
Smart plan features to consider:
- Roth contributions
- Catch-up contributions for older workers
- Thoughtful loan or hardship provisions (with guardrails)
Your role is to help clients evaluate these features not just through a benefits lens—but through a fiduciary lens as well.
- Monitor Investment Lineups Regularly
As fiduciaries, plan sponsors are obligated to monitor their plan’s investment options regularly and ensure they are appropriate for participants. You can help by recommending:
- A streamlined, core menu of well-diversified funds
- A robust, age-appropriate QDIA
- Tools like managed accounts or model portfolios for personalized guidance
Make sure your clients have an Investment Policy Statement (IPS) in place and that investment-related decisions are well-documented. This protects both them and you as their advisor.
- Reinforce Fiduciary Governance—With a 3(16) Fiduciary Partner
Another value-add you can bring to a retirement plan client is helping them reduce their fiduciary liability and administrative burden—and this is where an ERISA 3(16) fiduciary partner becomes invaluable.
Why a 3(16) fiduciary matters:
Most plan sponsors don’t realize the extent of their fiduciary responsibilities, especially around plan administration. A 3(16) fiduciary assumes responsibility for:
- Monitoring for timely and accurate contributions
- Distributing required notices
- Approving loans, Qualified Domestic Relations Orders (QDROs), and distributions
- Signing and filing Form 5500s
When you bring in a qualified 3(16) fiduciary provider, you help:
- Reduce your client’s personal liability
- Offload administrative tasks
- Promote regulatory compliance
This also positions you as a strategic advisor who brings solutions—not just products—to the table.
- Make Governance and Oversight a Priority
Fiduciary best practices are no longer optional—they’re expected. Encourage your clients to formalize oversight of their plan with:
- A retirement plan committee
- A well-documented Investment Policy Statement (IPS)
- Regular benchmarking and plan reviews
- Clear documentation of decisions and vendor evaluations
Adding a 3(16) fiduciary to this structure enhances protection for the plan sponsor and gives you more time to focus on investment guidance, plan growth, and client relationships.
- Drive Participant Engagement Through Education
Great plan design means nothing if participants aren’t engaged. Advisors have a critical role to play in driving participant engagement—especially when differentiating your practice.
Consider offering or coordinating:
- Financial wellness education
- One-on-one guidance or group workshops
- Communications tied to life stages (e.g., nearing retirement, paying off debt, starting a family)
A 3(16) partner can help reduce your administrative burdens, freeing you up to focus on some of these deeper, value-added conversations to drive enagement.
Final Thoughts: Elevate Your Role with Better Design and Delegation
Retirement plan design is no longer just about offering a menu of funds and a match formula. Advisors who understand how to balance compliance, fiduciary risk, administrative simplicity, and improved plan and participant outcomes for their clients are better positioned to win and retain business.
By integrating 3(16) fiduciary services, you demonstrate that you understand some of the biggest pain points plan sponsors face—and that you bring complete, strategic solutions that reduce risk, streamline operations, and improve retirement readiness.
In a competitive advisory landscape, that’s a powerful differentiator.