MV Financial was introduced to the CFO and General Counsel of a government contractor with 250 employees and multiple offices across the country. The referral came from a CPA who acknowledged the plan had not been reviewed or “benchmarked” for many years. The plan size was roughly $25,000,000 in assets and was managed by a well-known national insurance company under a group annuity contract platform. The General Counsel was the primary decision maker for the plan. At first, he was resistant in reviewing the plan’s metrics. However, he quickly realized that the plan needed a change after reviewing MVF’s benchmark and understanding how much improvement could be made.

Issues Identified

We uncovered the following deficiencies and concerns during the benchmark and subsequent review with the plan’s administrators/sponsors:

• Lack of Fiduciary Protection
  • The administrator/sponsor was responsible for investment selection and therefore personally liable for plan performance.
  • Investment options had different share classes with different levels of revenue sharing, a clear violation of ERISA.
  • The plan’s use of high-fee proprietary funds raised potential conflicts of interest.
• Lack of Education
  • Employees had access to vast resources through the employee website but no individualized education. Thus, 404(c) compliance was in question.
• Above-Average Fees
  • Plan fees were higher than average in this company’s peer group.
  • Investment options fees were higher than average and were underperforming their respective benchmarks over most periods.

MVF Solution

Based on the benchmark results, MVF offered the following recommendations:

• Delegate fiduciary responsibility to MVF as a 3(38) Fiduciary Investment Manager.
• Change the plan’s platform to an open architecture platform, moving away from proprietary funds and potential conflicts of interest.
• Provide risk-based actively managed portfolios utilizing a combination of exchange traded funds (ETFs) and institutionally priced mutual funds.
• Make MVF responsible for individualized employee education and support through on-site meetings, webinars, and phone calls.

Conclusion

The government contractor chose MV Financial to manage the plan’s investments and act as a 3(38) Fiduciary Investment Manager. Sponsors’ direct fiduciary responsibility was reduced and they realized annual cost savings of $150,000 per year by moving to an open architecture platform with lower cost investment options. Employees were thrilled to have individualized education and investment options that outperformed their respective benchmark over various periods. As a result, roughly 80% of employees deferred their investments to MVF’s managed portfolios. In the end, despite the General Counsel’s initial reluctance to review the plan, we achieved a positive outcome for both employer and employee.

MV Financial was introduced to a Washington, DC-based professional services firm with 30 professionals, an additional 25 support staff and total plan assets of $8,000,000. The firm’s plan was set up many years ago using a large national provider’s basic start-up plan platform, and didn’t change as the size of the firm and plan grew. The plan matching formula didn’t allow the primary partners to maximize their contribution due to limited plan design capabilities.

Issues Identified

We uncovered the following deficiencies and concerns during the benchmark and subsequent review with the plan’s administrators/sponsors

• Lack of Fiduciary Protection
  • The administrator/sponsor was responsible for investment selection and therefore personally liable for plan performance.
  • The plan’s use of high-fee proprietary funds raised potential conflicts of interest.
• Lack of Education
  • Employees had access to vast resources through the employee website but no individualized education.
  • Plan design did not allow for partners to maximize contributions.

MVF Solution

Based on the benchmark results, MVF offered the following recommendations:

• Delegate fiduciary responsibility to MVF as a 3(38) Fiduciary Investment Manager.
• Change the plan’s platform to an open architecture platform, moving away from proprietary funds and potential conflicts of interest.
• Provide risk-based actively managed portfolios utilizing a combination of exchange traded funds (ETFs) and institutionally priced mutual funds.
• Make MVF responsible for individualized employee education and support through on-site meetings, webinars, and phone calls.

Conclusion

The firm chose MV Financial because of our knowledge of alternative plan designs. As a result of our changes to the plan, the firm’s managing partners were able to begin maximizing their contributions. In addition, MVF’s actively managed risk based portfolios have performed well against their respective benchmarks. MVF also reduced sponsor’s fiduciary liability by serving as a 3(38) Fiduciary Investment Manager. Finally, employees have shown a positive response to the investment education sessions and one-on-one meetings that MVF provides.

MV Financial was introduced to the executive director of a non-profit association based in the suburbs of Washington, DC. The executive was disappointed with the performance of the investment options in his plan and concerned about his fiduciary responsibility. The association worked with an investment consultant, but given the consultant only served as an ERISA 3(21) co-fiduciary, the liability remained with the executive director. The association had two plans (401(k) and 457(b)) with 95 participants and combined assets of $15,000,000.

Issues Identified

We uncovered the following deficiencies and concerns during the benchmark and subsequent review with the plan’s administrators/sponsors:

• Lack of Fiduciary Protection
  • The sponsor was responsible for investment selection and therefore personally liable for plan performance despite working with an investment consultant.
• Lack of Education
  • Employees had access to vast resources through the employee website but no individualized education.
• Underperformance
  • Investment options underperformed their respective benchmarks over all periods.

MVF Solution

Based on the benchmark results, MVF offered the following recommendations:

• Delegate fiduciary responsibility to MVF as a 3(38) Fiduciary Investment Manager.
• Shift the plan from proprietary funds and potential conflicts of interest.
• Provide risk-based actively managed portfolios utilizing a combination of exchange traded funds (ETFs) and institutionally priced mutual funds.
• Make MVF responsible for individualized employee education and support through on-site meetings, webinars, and phone calls.

Conclusion

The Executive Director and management team were thrilled to delegate their fiduciary responsibility to MV Financial as a 3(38) Fiduciary Investment Manager. We were able to provide high quality investment options while offering a specialized education program to the employees that allowed for one-on-one support. As a result, 85% of employees deferred their investments to MVF’s managed portfolios and roughly 81% of total plan assets are held in the managed portfolios. The managed portfolios have also outperformed their respective benchmarks over relevant periods