Rockland Trust has created a Fiduciary Compliance File, a step-by-step notebook that clients can use to make sure that their retirement plan is a sound one.

“Hundreds of thousands” of people are legally responsible for retirement plan assets – but they may not know it, or understand how to fulfill their duties.

That estimate was offered by Sean McGarry, a vice president and retirement plan services manager at Rockland Trust.

“They really get little to no training, especially in the small-plan market,” said McGarry.

Yet so-called retirement plan fiduciaries are required by ERISA, the 1974 federal Employee Retirement Income Security Act, to set investment policy, understand potential investment choices and make sure their retirement plans are “prudent” ones for plan participants.

Some larger employers are becoming the subjects of lawsuits for failing to execute those duties adequately. A recent high-profile example of that trend was at Enron, McGarry said, although that was unusual in that the Texas company’s retirement-plan problems appeared to be a deliberate breach.

Most problems arise simply because a fiduciary didn’t understand his or her duties, he said. Until now, he added, the largest employers have been under the most scrutiny, he added. McGarry said he’s looked at that situation and thinks he can make their experiences instructive to smaller ones.

A former retirement plan third-party administrator who’s been with his new employer since August, McGarry has created a product that he hopes will fill in the gap in retirement plan services that Rockland Trust, which has $2.9 billion in assets, offers its business-owner clients with retirement plans valued at $10 million or less.

Last week, the bank’s Investment Management Group announced it has created a Fiduciary Compliance File, a step-by-step notebook that clients can use to make sure – and prove to government officials, if necessary – that their plan is a sound one.

It offers advice on the vendor search process, vendor contracts and agreements, compliance activities, participant communication and similar topics, in an easy to use, tab-divided notebook that Rockland Trust employees will go through with retirement-plan clients once or twice a year.

“We wanted to formalize the process of educating fiduciaries,” McGarry explained.

‘Niche Market’
With 69 percent of working Americans participating in some form of retirement plan, and small businesses a significant part of the economy, McGarry said, there’s a “niche market” for the kind of service Rockland Trust is rolling out.

Jeffrey Smith, a senior vice president at Rockland Trust, who manages the financial advisors and retirement plan servicers at the bank, said small to mid-sized businesses are a “very underserved market,” in terms of retirement plan services.

Typically, those businesses don’t have access to the large accounting firms, he noted, and they tend to buy their retirement plans from insurance companies, which sell them almost as an afterthought alongside health insurance.

But retirement plans are more regulated and require more investment expertise to be sure they comply with the law, Smith said.

Roughly 50 percent of workers participate in the much more common “defined contribution” plan, such as a 401(k), in which the employee – and sometimes an employer – contributes a certain amount each pay period.

A smaller number (17 percent) have access to much more expensive and difficult-to-administer “defined benefit” plans, in which generally very large employers offer their workers a set amount upon retirement.

Rockland Trust’s new Fiduciary Compliance File will be offered to small-business clients who offer defined-contribution plans – specifically, plans governed by ERISA Section 404(c), through which participants select their own funds, after the choice of selections has been presented by the plan sponsor.

“This type of plan is more vulnerable. [Its fiduciaries] need more protection Â… it’s a more vulnerable relationship,” McGarry explained.

About 20 clients at Rockland Trust who fit that profile will have the Fiduciary Compliance File offered as part of their service package beginning next month.

Rockland Trust actually has about 60 business clients to whom it sold retirement plans. The rest of the retirement plans are trustee-directed, meaning participants do not select their funds.

However, the balance is shifting toward participant-directed plans, McGarry said.

Rockland Trust has nearly 2,500 commercial loan clients overall, but will only offer the Compliance File to clients who buy retirement plan packages from Rockland Trust, according to Smith.

“We hope they’ll see it as a value-added proposition” that also makes sense for the bank, which would need complete access to the retirement plan in order to make sure it complies, he explained.

Smith added that the bank’s Investment Services Department has run the Compliance File by certified public accountants who audit retirement plans in its market area.

“They loved it,” he said.

Rockland Trust employees will sign on as trustees to a business retirement plan, if asked, meaning they share legal responsibility for a plan’s assets. As trustee, they’re co-fiduciary, meaning they help create the actual plan and are required by law to ensure it’s run in a prudent manner.

Most consultants who serve the smaller-plan market won’t sign on as co-fiduciaries, McGarry explained, either because they aren’t trained to do so or their employer won’t allow it. And, he said, surveys show that most business owners surveyed don’t see themselves as fiduciaries of retirement plans they offer, either.

David Floreen, senior vice president for government affairs for the Massachusetts Bankers Association, said Rockland Trust is one of about 25 banks in Massachusetts (of about 200 overall) that have a trust department of significant size – which is required in order to take on fiduciary and trustee responsibilities.

Floreen said Rockland Trust’s new product could be seen as a trend, in that it represents a bank’s effort to create a new product, aimed at a market it has identified as underserved.

The retirement plan market, which consists of people who have enough assets to put away money for retirement, has the potential to be quite lucrative, he pointed out.

“Institutions are considering what markets are underserved,” he explained. “They look in their market area to find out what are the likely needs and concerns of prospective customers, and ask which of those can be profitable Â… and if you look at the demographics of Massachusetts, it’s relatively stagnant, and it’s wealthier.”

Just 18 months ago, he pointed out, one of the nation’s largest banks, Bank of America, opened its U.S. wealth management headquarters in Boston.

Rockland Trust’s new product could well be a good fit to the “broad market opportunity” provided by wealth management services in general in the Bay State, he said.

“They’ve had a major Trust Department for years. This is simply building on their expertise.”