When one reads "Five Areas 401(k) Plan Sponsors Must Address to Reduce Fiduciary Liability" (FiduciaryNews, January 18, 2012), one is struck by its subtle conclusion. After all the effort put into educating 401(k) plan sponsors, they still focus more on making widgets (or whatever their company provides) than on retirement plan fiduciary due diligence.
This behavior often frustrates professional advisers. These fiduciaries extent much effort to guide plan sponsors through the briar patch of ERISA-dom. Yet, like any other duffer, to many plan sponsors keep hitting the ball into the trap. It's as though they like the sand (or the water or the rotating blades of the windmill – choose whatever metaphor you prefer). Why does all this guidance fall on deaf ears? Are professionals just too anal? Or do plan sponsors have some sort of inbred death wish.
The answer is most likely "no" to these questions, but it doesn't mean there's not a better alternative.
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But before we get to that, we do need a reality check. Most plan sponsors do not have huge HR staffs to monitor all things fiduciary within their 401(k) plans. Yes the large companies we hear about everyday do, but let's be honest, the typical 401(k) plan belongs to a smaller company. Smaller companies tend to avoid a lot of the personnel redundancy made possible by the huge revenues of larger companies. That means very few small companies can afford to keep employees whose eyes are not forever on the ball of revenue generation.
This just in: 401(k) plans do not produce revenues.
Sure, you may offer the line about employee benefits making happier employees and happier employees are more productive employees and more productive employees create more profits. For most small company executives, however, profits only exist in actual dollars and actual dollars only come in from selling products and services. Employee productivity – which everyone acknowledges can enhance profits – may be attributable to the existence of employee benefits but it's just as likely to be attributable to the local professional sports team winning the most recent game.
In other words, who knows what drives employees. And since we don't know what drives them, small companies need to keep encouraging them to do what needs to be done to bring in more revenues.
This just in: 401(k) plans still do not produce revenues.
Why, then, should we expect 401(k) plan sponsors to care about their plans? They've hired professionals to make sure the plans work properly, isn't that enough? Well, yes and no. And in that dual response lays the answer we seek.
Plan sponsors want to rely on their professional adviser and they should rely on their professional adviser. Given that, maybe their professional adviser should start acting with more authority. Why not put the question directly to the 401(k) plan sponsor? Professional advisers can ask "Hey, I know you really don't want to stick your nose in this, so why not give me the authority to take care of things for you?"
And we're not just talking about picking investment options, we're talking about curating the information the plan sponsor reads. For example, what if the adviser provides weekly or monthly news updates to the plan sponsor? There are plenty of "Week in Review" resources that focus on 401(k) plans. The professional adviser can vet these news stories, package together a series of links and e-mail them to the plan sponsor on a regular basis. This way, plan sponsors have a running record of relevant articles and can peruse them at their convenience. This would take a load off the shoulders of the plan sponsor and allow the professional adviser the opportunity to provide another value-added service.
In the end, this will be more effective than relying on the plan sponsor to read independently provided articles. Why? In this age of information overload, even normally trustworthy sources are merely glazed over. The stories – no matter how pertinent and important – fade into the white noise of the incessant media chatter.
If a curate previews the articles and separates the wheat from the chaff, the plan sponsor has greater confidence in the significance of the story and is more likely not only to read it, but to read it more deeply.
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Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
