Ins and Outs of Fiduciary Outsourcing for Credit Unions

By: Richard W. Rausser, Senior Vice President of Client Services, Pentegra Retirement Services

With retirement plans seemingly becoming ever more complicated, outsourcing of fiduciary investment responsibilities has steadily become more commonplace. This is especially true in the case of the C-Suite at credit unions, which can find outsourcing very appealing.

Not only is the passing along of fiduciary responsibilities one less burden for credit union managers, allowing them to focus on day-to-day business and obviating the need for them to become qualified plan experts, but the practice can also serve to insulate them and their credit union from a number of risks.

Benefits of Outsourcing

Outsourcing to a sanctioned third-party fiduciary guarantees that a given plan’s documentation is up to date, complies with all laws and regulations, and delivers appropriate disclosures to plan participants and sponsors.

If a plan is large enough (meaning it has roughly 100 to 120 participants) it requires an independent auditor – the selection of which again can be provided by the external fiduciary, saving the credit union time and money. (It should be noted that investment fiduciary outsourcing can be appropriate for defined benefit and defined contribution plans of all sizes.)

In addition, the day-to-day management of a plan involves, among other things, making sure the plan is running as it should be; nuts and bolts record-keeping; and administrative decisions about such issues as a plan participant’s request for a loan or a hardship distribution.

Customizing Responsibilities

Arranging the responsibilities of a third-party fiduciary should be fairly easy to customize; one can outsource all of the above or cherry-pick whichever duties one wishes on an ala carte basis.

A credit union needs to provide a reputable third-party fiduciary with the following:

  • Data on the plan participants;
  • The money involved with the plan; and
  • A commitment to regularly review the plan’s performance (usually once a year).

In that way, any questions or concerns can be addressed efficiently. (Of course, any issues that rise before the review date can also be discussed at any time.)

Fiduciary Responsibility

If there are record-keeping errors made by the outside fiduciary, it is that fiduciary’s responsibility to make amends, including making up any monetary shortfall. In the unlikely case of a participant-filed lawsuit, the outside fiduciary is again front and center, providing the defense in the case and making good on any claims or settlements.

The credit union’s board and senior management are insulated from responsibility; even though the plan ultimately belongs to the credit union, it is the named fiduciary who holds the liability in such instances.

Such an arrangement can also be of value in the case of multiple employer plans (MEPs), an employee benefit plan that can be maintained as a single plan in which two or more unrelated employers participate. As each credit union has its own separate boards of directors, the advantages of having an independent fiduciary to manage and administrate the plan are readily apparent.

Credit Union Responsibilities

All of that said, there will remain some fiduciary responsibilities and liabilities for the fiduciary responsible for selecting and contracting with the outsourced fiduciary. Breach of contract is the most obvious of these, but there is also the matter of monitoring/reviewing with the outside fiduciary that I mentioned previously.

In addition – and this should go without saying – it is incumbent upon the relevant credit union executive to read all communiques from the third-party fiduciary, and to ask and follow through on any questions or concerns.

None of these duties should be particularly onerous, especially if you have chosen a reputable external fiduciary. When considering such a company – as you should with all outside vendors – “test drive the car”: Find out all you can about several different ones, ask lots of questions, and make as informed a final decision as possible.

Learn more from Rich by watching the recorded webinar: “Innovative Retirement Plan Design for Maximum Results.”

About Rich Rausser:
Richard W. Rausser has over 25 years of experience in the retirement benefits field. He is Senior Vice President of Client Services at Pentegra Retirement Services, a leading provider of retirement planning services to financial institutions and organizations nationwide, founded by the Federal Home Loan Bank System in 1943. Rich oversees Pentegra’s consulting, marketing and communications and actuarial service groups at Pentegra. He is a frequent speaker on retirement benefit topics; a Certified Pension Consultant (CPC); a Qualified Pension Administrator (QPA); a Qualified 401(k) Administrator (QKA); and a member of the American Society of Pension Professionals and Actuaries (ASPPA).

Pentegra_Logo_FinalPentegra is the NAFCU Preferred Partner for Qualified Retirement Plans for Credit Union Employees

Decumulation: There Is No Rule of Thumb

By Rich Rausser, CPC, QPA, QKA,   Senior Vice President, Pentegra Retirement Services

In most pursuits, people usually look for a “rule of thumb” when it comes to sound strategies or best practices. However, when it comes to developing a retirement plan strategy the rule of thumb is that there is no rule of thumb.

The reason for this may be obvious. As individuals, we all have our own needs, wants and concerns; many of us may be the same age, live in the same geographical area, and even make the same exact salary. Even if two people were hired on the same day by the same firm at the same salary, and made equal contributions to their 401(k) plans throughout their careers, there are still a number of variables to prevent them from taking a “one size fits all” approach to decumulation.

Are both persons married? Are their spouses/partners both working and, if so, what are their salaries and retirement savings? Do they have any children? Where are they in terms of college expenses and healthcare needs?

Unrealistic Rules

I note this because there has been some discussion of late over an industry-wide “rule of thumb” that suggests retirees should try to replace 80 percent of their income during the first year of retirement. While that may be an admirable goal, it may not be realistic for many retirees for the reasons listed above as well as others.

Another specious rule of thumb is that retirees will simply take their 401(k) savings as a lump sum distribution when they retire. While lump sum distributions are certainly a viable option, many plan participants may not even be aware that other options exist and may benefit from further education about alternative distribution options.

Alternative Distribution Options

Many 401(k) plans have numerous distribution options, thus offering a tremendous amount of flexibility in how retirees can take their money. These can include what we call an “ad hoc distribution” – whereby the retiree takes out some money whenever he or she wants; a regular, periodic distribution — $2,000 per month, for instance, or $6,000 per quarter; or structuring payouts over the retiree’s life expectancy.

There is another option that I have mentioned before: supplementing one’s retirement income by purchasing an out-of-plan annuity that can provide a guaranteed level of income to retirees for as long as they live. If a retiree puts 20 to 25 percent of their retirement savings into an annuity, with Social Security providing supplemental income and the rest of the retiree’s account balance consisting of various other pieces, the retiree is in effect “pensionizing” part of their retirement savings.

The annuity option should be available to every 401(k) plan participant, regardless of individual circumstances; it should be viewed as another tool in their retirement savings tool box.

Retirement plans should be constructed in a way that provides the best possible solutions to its plan participants in a cost-effective manner.

For additional information, watch the recent webinar, “Keys to Building Successful Retirement Outcomes.”  Or, download The Pentegra Distribution Path™  for an overview of all the options available to employees and essential tips for creating a decumulation strategy to build a lifetime income stream.

Pentegra_LogoPentegra is the NAFCU Services Preferred partner for Qualified Retirement Plans for Credit Union Employees. More educational resources and contact information are available at

10 Steps to Better Retirement Planning for the New Year


Rich RRich Rausserausser is a Certified Pension Consultant (CPC), a Qualified Pension Administrator (QPA), a Qualified 401(k) Administrator (QKA), and a member of the American Society of Pension Professionals and Actuaries (ASPPA). He holds an M.B.A. in Finance from Fairleigh Dickinson University and a B.A. in Economics and Business Administration from Ursinus College. 

Pentegra Retirement Services is the NAFCU Services Preferred Partner for Qualified Retirement Plans for Credit Union Employees.

The start of every New Year brings the promise of new beginnings; a time to think about setting goals and resolving to do new things, particularly when it comes to finances.

It is important to take a few minutes this month to think about the state of your retirement portfolio and to commit to an annual self-assessment.  This should be more than ‘I will spend less’ in 2015. One of your resolutions should be to find better ways to manage your finances and invest your money.

I encourage everyone to jump-start their efforts with this checklist:

1. Increase Plan Contributions:  Are you contributing as much as you can afford to your retirement plan? The more money you put into your plan now, the bigger your potential retirement nest egg. Adding as little as five or ten extra dollars per paycheck could make a big difference over the long term.

2. Make Catch-up Contributions: Your plan may allow you to make “catch-up” contributions over and above the regular contribution limit if you are age 50 or older. If possible, take advantage of the opportunity to give your retirement savings a boost.

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Getting Our Hands Dirty

Written by John E. Pinto, President and CEO, Pentegra Retirement Services

Register for the webinar, “The 401(K) Plan of the Future,” presented by Pentegra Retirement Services and NAFCU Services on Wednesday, August 13, 2:00-3:00 p.m. ET. Register here.

It was not a typical day for retirement plan professionals, but it was certainly memorable.

On May 15, 2014, I had the pleasure of joining 15 of our passionate employees from our White Plains headquarters to clean gardens, dig in the dirt to plant flowers, and create crossword puzzle white boards. This was one of the most productive and fulfilling days—personally and professionally—we agree we’ve all had in a long time, and I guarantee that we will be doing it again soon!

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It’s the End of the World as We Know It, and I Feel…Fine?

Originally published on

No, I’m not talking about the fiscal cliff, although some here in Washington, DC are calling it the end. Worse. The Mayan calendar ends on December 21, 2012 and if you’re into certain doomsday theories, that day marks the end of the world. Which means I need to quit my job today, right now, and enjoy my remaining time on earth (T-minus 30 days) lounging on a faraway tropical island.

For the most part I’m joking, but fantasizing about cashing out to live on an island makes me wonder—will I be ready to retire when I want to?

Although retirement seems like a lifetime away (at least twenty years), and I have a background in financial services, I’m not so sure that I’ll be ready when the time comes. I have a 401(k)—several actually—as well as IRAs, brokerage accounts, and a rainy day fund. I even participate in direct stock purchase plans. It would seem like with my knowledge of financial planning (and a predisposition towards frugal living, thank you Mom) that I would be well on my way to a secure retirement. The uncertainty of the market over the past few years has left me questioning my ability to ever retire. Unfortunately, quite a number of people feel the same way.

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