Plan Sponsors, Could You be Crippling Your Participants Retirement?
After well over four decades of general tomfoolery and dangerous pursuits, including dirt bike and sled jumps, snow and water skiing, backpacking, rollerblading, and volunteering to help lead a church junior high group, all activities during which I’ve had some absolutely spectacular wipeouts, you would have thought I’d sustained quite a few serious injuries by now. Not so. I even got into a rather awful car accident this summer, from which I walked away, incurring just a few minor cuts and bruises. No biggie.
Then back in August, I played dodge ball with my son’s Boy Scout troop and I fell awkwardly, cracking my tibia at my knee. Oof. Not my finest hour. The next couple of months were spent on crutches, and while I am now walking and recovering very well, I’m still in rigorous therapy (physical therapy that is, although some would argue I have other therapy needs as well). Throughout this whole process, I have learned a lot. And as usual, I have this inane compulsion to relate it to my line of work.
Are you putting your plan participants on crutches?
One thing I learned through all of this is that when you are on crutches, accomplishing just about anything other than reclining catatonically in a La-Z-Boy® is going to be a challenge, especially if you want it to happen smoothly. Who knew how blessed I was to be able to just grab a cup of coffee without having to draw up a project plan.
Your participants’ “crutches” consist of anything that makes their process of getting to retirement awkward. And unfortunately, in most cases, plan participants have crutches because the plan sponsor has them. What are these crutches?
- A plan design that is out of sync with employer and participant goals
- A provider that should be switched out, but nobody seems to have the time or will to make it happen (Sometimes you just need to rip the bandage off)
- Plan fees that are excessive because nobody understands how to conduct a benchmarking study
- Lack of communication on the plan and its benefits to employees
- A fund menu that nobody can remember why or when it was first offered through the plan
Notice that because nobody is complaining, plan sponsors and participants alike live with their crutches, as there is no will to do the therapy to fully recover. The good news is if you find the right “doctor” you can get the right guidance to make sense of it all and take some action. So another thing I learned through recovering from my mishap is to…
Make sure you are listening to the right people.
This may seem obvious, but it is usually best to not listen to the well-intentioned folks who think that just because they have experience, they are experts. In the case of an injury, this is everyone other than your doctor. You know who I’m talking about. These are good people, but they have an opinion on how every aspect of your recovery is going to go. Think of when you had to get your wisdom teeth pulled, and you made the mistake of telling your friends, who seemed to almost enjoy sharing their own worst-possible-case scenarios, to the point where they had to sedate you just to get you in the car for your initial consultation.
Engaging the right expert is particularly important when considering a plan’s investments. The participant who watches CNBC tirelessly, or whose brother-in-law is his broker, and who comes to you saying the plan must offer a sector fund, or a brokerage window, or whatever to be competitive, is obviously not an expert. That should be fairly clear.
It gets a bit hazy, though, when the investment committee has members who in fact do have a great deal of financial experience, but that experience is not in retirement plans. While this experience can no doubt be valuable to the plan, there is a tendency to rely heavily on strong financial backgrounds without considering the extra layers of nuance and complexity that the IRS and DOL requirements layer on top of this type of investment program.
Even if you have valuable finance and investment experience on your plan’s investment committee, to properly fulfill fiduciary duty, it is imperative to enlist the help of someone who has the experience, background and other credentials to serve qualified retirement plans. And the firm you hire should be acting as an independent fiduciary.
So take a look at the expertise in your committee. Do you need to bring in some outside help in order to round out the knowledge base that you are using to make decisions on behalf of the plan? Surround yourself with the people you need to act in the best interest of your plan participants. Don’t send them to the dodgeball court, which we know is fraught with peril and can lead to some crippling outcomes!
Do you have questions about your current plan design or investment committee structure? Talk to our experts today!
Scott Gehman, ERPA, CEBS
Retirement Plan Consultant