Advisor Connect

Compliance Essentials

At a glance, compliance tests assure that every retirement plan is producing a meaningful benefit to rank and file employees and that it demonstrates a level of fairness in the benefits those same employees get as compared to the benefits achieved by owners and other highly compensated employees.

While it's not your responsibility to oversee these tasks, we think it's important to keep in mind that data requests and compliance tests are part of how clients experience their retirement plans and by extension, how they experience us.

As a trusted advisor, you have an opportunity to use this topic to help set expectations and create comfort about essential elements of operating a retirement plan that we know many plan sponsors don't fully appreciate. It serves our mutual self-interest, of course, to create awareness about these data requests and compliance tests, and to explain what we need from clients so that we can make it as easy as we can for them. It's also an opportunity to communicate what they can expect to hear from us based on the routine information we gather and based on the tests we run.

It may seem obvious that we need good and timely data in order to avoid operational errors that can sometimes create compliance issues that cost real money and time to fix. In other words, it's always better to stay current than to catch up. And failures, even if they are entirely a client's own doing, will understandably impact their perception about the complexity and effort of maintaining their retirement plan. And, in that light, it's certainly harder to maintain alignment on long-term goals if they are focused on short term problems.

With good data, we will know, for example, if company owners are reaching their contributions limits. When this happens, there's likely a good reason to talk about additional features or other plan design options that may provide opportunities to save even more on current year taxes while investing more for their future.

It's also one of the ways in which we can demonstrate the consultative role we play in helping clients optimize their path to long-term success. Otherwise, even excellent operational or investment performance can be become routine and, in many cases, be regarded as a commodity service. Let's work together to communicate our collective value and keep plans on track.

We invite you to get in touch if you have questions about our compliance testing process and how it impacts your clients.


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