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401(k) Sub-Advisory Services Terms

Updated October 15, 2024
  1. Introduction. If Client has engaged a Third-Party Advisor to serve as a fiduciary investment manager to the Plan, Client understands and agrees that these Sub-Advisory Services Terms govern all aspects of Client’s relationship with Betterment LLC (“Betterment”) and are incorporated by reference into the Betterment at Work Master Services Agreement (“MSA”).
  2. Third-Party Advisor Status and Responsibilities. As described in the Third-Party Advisor Direction and Addendum, and as indicated by Client in the Betterment at Work MSA Statement of Work, Client appoints Third-Party Advisor (i) as an Investment Manager within the meaning of ERISA section 3(38) (a “3(38) Advisor”), for the purpose of selecting and determining the suitability of the Products available to Participants through the Program (such selected Products are considered “Plan Investments”), or (ii) to provide investment advice within the meaning of ERISA section 3(21) (a “3(21) Advisor”) for the purpose of recommending suitable Plan Investments to Client. 
    1. In the case of a 3(38) Advisor, Client appoints Third-Party Advisor to select one or more suitable Plan Investments and to designate one or more Plan Investments as a “qualified default investment alternative” (“QDIA”) (as defined in DOL Regulation section 404(c)-5) for the investment of Assets held in Defaulted Participant Accounts. In the case of a 3(21) Advisor, Client appoints Third-Party Advisor to recommend one or more suitable Plan Investments and recommend a QDIA to Client, which the Client shall designate.  A Defaulted Participant’s Account will remain invested in the investment strategy designated as the QDIA until the Defaulted Participant accesses the Betterment Interface, agrees to the Participant Terms and Conditions, and selects an alternative Plan Investment option for the investment of the Assets in Participant Account.  Client acknowledges and agrees that neither Betterment nor its affiliates will evaluate whether the Third-Party Advisor’s Plan Investments are suitable for any Participant’s individual investment objectives.
    2. Third-Party Advisor is solely responsible for periodically reviewing and adjusting, or recommending the adjustment of (as applicable), the Plan Investment options to ensure they continue to reflect the Plan’s intended investment objectives. No review or feedback provided by Betterment to Plan or Third-Party Advisor with respect to any Plan Investment shall imply any duty to determine suitability or be construed as a waiver of the provisions of this section. Third-Party Advisor shall monitor the Plan’s Participant Accounts incorporating any Plan Investments on a periodic basis. Third-Party Advisor is responsible for informing all Clients of the allocation of responsibilities between Third-Party Advisor and Betterment, as described in these Sub-Advisory Terms and in the Third-Party Advisor Direction and Addendum thereto.
    3. For the avoidance of doubt, the Betterment Entities will have no responsibility for the selection of or recommendation of suitable Plan Investments, including the QDIA, and will bear no liability or  responsibility for any such decisions.
  3. Betterment Sub-Advisory Status and Responsibilities. Client hereby appoints Betterment as an investment manager, within the meaning of ERISA section 3(38), for purposes of carrying out the sub-advisory services for Participant Accounts described in this section or otherwise expressly agreed to in writing between Client and Betterment. Betterment hereby accepts such appointment and acknowledges that Betterment will provide fiduciary sub-advisory services pursuant to these Sub-Advisory Services Terms. 
    1. As a part of its sub-advisory services, Client appoints Betterment to manage Participant Accounts on a discretionary basis and act as Client’s attorney-in-fact with limited power and authority for Client and on Client’s behalf to buy, sell, and otherwise effect investment transactions in the name of the Participant Accounts in accordance with the Plan and fiduciary duties under ERISA. Betterment shall manage Participant Accounts by issuing trading instructions to Betterment Securities to cause the Participant Accounts to purchase and sell Plan Investments pursuant to their selections and investment preferences. Although Participants will select their Plan Investments and an allocation among them, Betterment is responsible for placing orders to effectuate those selections, and neither Client nor Participants are able to place trades in Participant Accounts.
    2. Participants have the ability to exercise independent control over their investments by providing Betterment with instructions through the Betterment Interface, including by selecting their desired Plan Investments and allocation. For any Participant who selects one or more Plan Investments, Betterment will allocate the Participant Account in accordance with the selected Plan Investments, or in the case of a Defaulted Participant, the QDIA. Notwithstanding that Betterment makes available Plan Investments to Participants through its Interface, neither Betterment nor Betterment Securities makes any representation or warranty regarding such Plan Investment’s suitability, quality (including liquidity, market depth, and bid-ask spread), or Betterment’s ability to obtain favorable execution with respect to such Plan Investments.
  4. Proxy Voting. The Plan delegates to Betterment the authority to and directs Betterment to (a) receive and vote all proxies and related materials for securities held by the Plan; and (b) vote on other corporate actions, like tender offers, which do not require a proxy or are not solicited via proxy. When Betterment votes, Betterment agrees to vote on matters in a way that is reasonably expected to ensure that proxy matters are conducted in the best interest of clients.

    Client understands and agrees that Third-Party Advisor (as a 3(38) Advisor, or at the direction of Client as a 3(21) Advisor) is responsible for instructing Betterment how to vote all proxies and other corporate actions for Plan Investments designated as a QDIA, and shall direct Betterment to cast votes on behalf of the Plan. Client directs Betterment to abstain from voting on other securities, including but not limited to funds available as Plan Investments unless directed how to vote by the Client or Plan Advisor. Other than as instructed by Third-Party Advisor or Client, Betterment will vote only on proxies and respond to corporate actions associated with securities that Betterment currently selects for its Betterment constructed portfolios, which consists of broadly diversified exchange-traded funds (ETF) available to individuals through its retail business line. Clients may request information regarding how Betterment voted a Client’s proxies, and Clients may request a copy of Betterment's proxy policies and procedures by emailing support@betterment.com. Betterment will vote, or cause to be voted by a proxy voting service, proxies, and shall provide instructions on any tender or exchange offer or other corporate action (including voluntary and mandatory reorganizations, such as mergers, name changes, stock splits and reverse stock splits), in accordance with applicable law, including ERISA. Unless Betterment otherwise agrees in writing, Betterment will not advise Clients or Participants or act for Clients or Participants in any legal proceedings involving securities held or previously held in the Account or the issuers of these securities. 
  5. ERISA Bond. To the extent required by ERISA, Betterment will obtain and maintain a bond in compliance with ERISA section 412 for itself and its affiliates. For the avoidance of doubt, Plan Administrator is responsible for obtaining and maintaining appropriate fidelity bond coverage for its Plan and other persons required to be bonded pursuant to ERISA section 412.
  6. Interaction With Other Betterment Accounts. Client acknowledges and understands that a Participant may open, or may already have opened, an account or accounts with the Betterment Entities in addition to a Participant Account under the Plan (e.g., taxable personal accounts or IRA accounts). Such other accounts are not subject to the Services Agreements, and the fees payable with respect to such other accounts are not covered by the fees specified in the Administrative Services Terms. Additionally, if a Participant has opened such other accounts with the Betterment Entities, Betterment may offer certain services that consider all Assets held in all of the Participant’s accounts with the Betterment Entities holistically (including Assets held in the Participant Account under the Plan). If a Participant opts into such services, Betterment may, after considering all of a Participant’s Betterment accounts, choose different Products to facilitate tax loss harvesting or recommend a different allocation for the Participant Account. Accordingly, Betterment may manage the Participant’s Account differently than it would otherwise.
  7. Account Contributions and Distributions. Client understands and agrees that, subject to applicable law, including ERISA, erroneous contributions will be credited as Plan Assets, and Client will direct their allocation. 
  8. Limitation. Client understands and agrees that, except where required by ERISA, Betterment may, but does not have any obligation to, review any action or inaction of another Fiduciary (including Third-Party Advisor) with respect to an Account, and Betterment is not responsible for determining whether another Fiduciary’s action or inaction satisfies the standard of care applicable to such Fiduciary’s handling of an Account. Any review of any action or inaction of another Fiduciary by Betterment shall not imply any duty nor be construed as a waiver of this Section. 
  9. No Guarantee of Performance. Client understands and agrees that the Betterment Entities offer no guarantees of investment performance based on the predictions and suggestions of the investment tools or other advice provided through the Program, or via Supplementary Services. Client represents that Client is aware of and is willing to assume risks involved with investing in the Products pursuant to the Program. None of the Betterment Entities guarantees or makes any warranty of any kind, express or implied, regarding the projections or recommendations generated by the investment tools.