What CFOs should consider outsourcing Benefits tasks

Most finance chiefs aren’t crazy about paying for the services of a benefits specialist when there’s an entire department in-house to handle that area of company operations. But in today’s regulatory environment, it may very well be the safest option.

These days  it’s too much for the majority of employers to keep track of all of the required forms and notices — not to mention the constant revisions — in-house. Therefore, it’s wise (and, in some cases, probably mandatory) to enlist the help of specialists to handle your benefits administration.

The fiduciary issue

That’s the advice of labor and employment attorney Keith R. McMurdy. What’s more, McMurdy doesn’t make his case by touting the advantages of a particular service provider or providers; rather, he does it by analyzing employers’ responsibilities under the current laws, such as ERISA Section 404.

Under Section 404, a plan fiduciary — like an employer that offers a 401(k) — is required to act with the “care, skill, prudence and diligence” that a reasonably prudent person would act with in a similar situation. And with the growing number of benefits specialists available to employers of all stripes, McMurdy believes it’s very much possible for a reasonable person to see the use of benefits specialists as prudent for employers acting as fiduciaries.

Translation: Employers that don’t look into taking advantage of the services offered by benefits specialists could find themselves on the hook for a violation of their “fiduciary duty” under the Employee Retirement Income Security Act (ERISA). And that’s guaranteed to be more costly than any providers’ services.

One recent law McMurdy uses to drive home his point is the 401(k) fee disclosure regs. Under the regs, employers are expected not only to review, understand, digest and report how fees are charged to plan participants, but also to minimize those costs. Employers who balk at expert help because of the costs are just asking for legal problems down the road, according to McMurdy.