Key takeaways:
- SPS provides investment advisory and investment management services for employer-sponsored retirement plans.
- Its work focuses on the plan’s investment lineup, not payroll, record keeping or personal investment advice for individual participants.
- SPS primarily supports small-business 401(k) plans whose leaders may lack the time or specialized knowledge to oversee plan investments internally.
- Plan sponsors may receive investment recommendations through a 3(21) service or delegate covered investment decisions through a 3(38) service.
- Employers remain responsible for prudently selecting and monitoring SPS and managing plan duties outside the service agreement.
Choosing a retirement plan is one of the biggest benefits decisions a small business makes. The right plan should support employees’ long-term financial goals while fitting the organization’s budget and administrative capacity.
The investment responsibilities that come with offering a retirement plan
Offering a 401(k) plan can help employees prepare for retirement and make a benefits package more valuable. It also gives the employer ongoing responsibilities for overseeing the plan.
One of those responsibilities is maintaining a prudent process for selecting and monitoring the investments available to participants. That work does not end after the initial investment menu is chosen. Funds and fund managers can change, expenses can shift and an investment that once fit the plan may no longer be appropriate.
Fiduciary investment support can give plan sponsors access to a defined process and investment knowledge without expecting internal leaders to become investment specialists themselves.
What is ADP Strategic Plan Services?
ADP Strategic Plan Services, LLC is an SEC-registered investment adviser and an indirect subsidiary of ADP, Inc. Its role focuses on the investment options made available through an employer-sponsored retirement plan.
Depending on the service selected, SPS may provide investment advice to the plan sponsor or assume responsibility for making covered investment decisions.
SPS is separate from both ADP payroll and ADP Retirement Services:
- It does not process payroll.
- It does not serve as the retirement plan record keeper.
- It does not provide personal investment recommendations to individual participants through these services.
Registration with the SEC does not imply a particular level of skill or service.
What does SPS do?
SPS helps plan sponsors manage the work involved in building and maintaining a retirement plan investment lineup.
Depending on the service selected, SPS may:
- Evaluate the plan’s investment options
- Select or recommend investments for the lineup
- Monitor investments on an ongoing basis
- Retain or replace an investment when appropriate
- Provide regular investment reporting to the plan sponsor
Investment evaluation involves more than looking at which funds recently earned the highest returns. An investment manager or adviser may also consider fees and expenses, risk, investment strategy, performance compared with peers and benchmarks, portfolio management changes and other quantitative and qualitative factors.
This work takes place at the retirement-plan level. SPS helps manage or advise on the investment options available through the plan, while participants remain responsible for their individual investment elections.
How does SPS fit with ADP Retirement Services and ADP payroll?
ADP Strategic Plan Services, ADP Retirement Services and ADP payroll perform different functions. A business may work with more than one of these services, but they are not interchangeable.
| ADP Strategic Plan Services | ADP Retirement Services | ADP payroll | |
|---|---|---|---|
| Primary role | Provides investment advisory or investment management services to plan sponsors of employer retirement plans | Provides retirement plan record keeping and administrative services | Supports payroll processing |
| Investment responsibilities | Advises on or manages covered investment options, depending on the service selected | Makes investments available through the retirement plan platform | Does not select or monitor retirement plan investments |
| Records and transactions | Does not serve as the plan record keeper | Maintains plan and participant records and supports plan transactions | Maintains payroll-related records |
| Relationship to SPS | Provides the investment service | SPS works with plans record kept by ADP Retirement Services | ADP payroll is not required |
Although SPS works with retirement plans record kept by ADP Retirement Services, a business does not need to use ADP payroll to engage SPS.
Who is SPS designed for?
SPS primarily supports 401(k) plans sponsored by small businesses, although larger plans may also use its services.
Small plans have many of the same investment fiduciary responsibilities as larger plans without having the same internal resources. They may also receive limited ongoing attention from traditional investment advisers because of their size.
Responsibility for the plan may rest with a:
- Business owner or company president
- Chief financial officer or controller
- HR or benefits leader
- Operations or office manager
- Member of a retirement plan committee
SPS may be relevant when a business:
- Has no internal investment specialist
- Reviews its investment lineup inconsistently
- Is uncertain about how funds should be evaluated
- Receives limited ongoing support from its current adviser
- Wants a repeatable process for monitoring investments
- Wants to delegate covered investment decisions
- Needs greater clarity about who is responsible for investment oversight
The need for support depends less on plan size than on the organization’s available time, knowledge and resources.
What 401(k) fiduciary services does SPS offer?
SPS offers different levels of support based on how involved the plan sponsor wants to remain in investment decisions.
3(21) Investment Advisory Services
Under a 3(21) arrangement, SPS provides investment advice and recommendations. The plan sponsor or another designated plan fiduciary reviews those recommendations and retains final authority over investment decisions.
This approach may suit an eligible organization that wants professional investment guidance while remaining directly involved in selecting or replacing the plan’s investment options.
3(38) Investment Management Services
Under a 3(38) arrangement, the plan sponsor selects an investment guideline it considers appropriate for the plan based on its suitability for their employees and appoints SPS as the investment manager.
SPS then receives discretion to select, monitor and, when necessary, replace covered investment options within that guideline. SPS accepts fiduciary responsibility for those defined decisions in writing.
This option may suit an organization that wants to delegate ongoing investment lineup decisions rather than review and approve each recommendation itself.
SPS offers 3(38) investment management services to ADP Retirement Services 401(k) and 403(b) clients, while its 3(21) investment advisory services are also available.
What responsibilities remain with the plan sponsor?
Working with a fiduciary service provider does not remove all of the employer’s responsibilities for the retirement plan. The plan sponsor must still prudently select and monitor SPS and understand which responsibilities are covered by the service agreement.
The employer also retains responsibilities outside that agreement, which may include plan administration, participant communications, contribution decisions and other parts of operating the plan.
Under a 3(21) arrangement, the plan sponsor retains final investment authority. Under a 3(38) arrangement, SPS assumes discretion for the investment decisions covered by the agreement.
Could your retirement plan benefit from additional fiduciary support?
Each business may need a different level of investment support. The following questions can help plan sponsors consider their current process and available resources.
| Questions to consider | How fiduciary support may help |
|---|---|
| Do we have the time and knowledge to evaluate our plan’s investment options? | SPS provides investment knowledge and an ongoing review process so internal leaders do not have to handle the work alone. |
| Do we review our investment lineup consistently? | SPS monitors covered investment options and provides regular investment reporting. |
| Is it clear who is responsible for selecting and monitoring investments? | The service agreement defines SPS’s role and the responsibilities retained by the plan sponsor. |
| Does our current adviser provide ongoing investment oversight? | SPS may provide advisory guidance or discretionary investment management, depending on the service selected. |
| Do we want to approve investment decisions ourselves? | A 3(21) service allows the plan sponsor to retain final authority, while a 3(38) service delegates covered investment decisions. |
| Are investment responsibilities competing with other priorities? | Delegating defined responsibilities can give internal leaders more time to focus on other plan and business needs. |
Is ADP Strategic Plan Services right for your retirement plan?
SPS can help plan sponsors bring greater structure and consistency to retirement plan investment oversight. The appropriate service depends on the support the organization already has and how involved its leaders want to remain in investment decisions.
Learn how ADP Strategic Plan Services can help manage your retirement plan’s investment lineup and investment fiduciary responsibilities. Connect with an ADP SPS representative to discuss your plan and available service options.
FAQs
Do I need to use ADP payroll to work with SPS?
No. A business does not need to use ADP payroll to engage SPS. Its retirement plan must use ADP Retirement Services for record keeping.
Is SPS primarily for small businesses?
SPS primarily serves 401(k) plans sponsored by small businesses, including plans that may receive limited ongoing support from traditional advisers or lack internal investment expertise. Larger retirement plans may also use SPS services.
Does hiring SPS remove all of the employer’s fiduciary responsibilities?
No. The employer must still prudently select and monitor SPS, understand the service agreement and manage responsibilities outside its scope. The specific investment responsibilities assumed or shared by SPS depend on whether the plan uses 3(21) Investment Advisory Services or 3(38) Investment Management Services.
Is SPS the same as a retirement plan record keeper?
No. ADP Retirement Services provides record keeping and administrative services for the plan. SPS provides investment advisory or investment management services related to the plan’s investment lineup.
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