New rules highlight 401(k) education lapses

education
education (Photo credit: Sean MacEntee)

Education is the foundation of all successful endeavours. When plan participants understand the what and the why they will save more and remain disciplined to a strategy. Plan participants do not have to know everything about investing, they just need to know the right things.

Maintaining effective plans with a strong education component isn’t just the right thing to do; it’s the foundation of a retirement plan that complies with federal rules. If plans are not delivering participant-driven education programs, they’re not equipping their participants to make informed decisions about their investments. Therefore, these plans are not compliant with federal rules and thus, they set up sponsorsfor potential lawsuits.This summer, when service providers supply plan sponsors with the required list of services they’re providing for their current compensation, companies should take note of whether education programs are included in their services. In many cases, they won’t be.

This shortcoming, along with various others showing how little many plans are receiving for the fees they’re paying, will prompt many sponsors to seek more reasonable fees. The best way to do this is to:

  • Issue a request for proposal (RFP).
  • Compare the scope of services to those offered by other providers for the fees being charged, with emphasis on individual employee assessment and education.

If effective, deeper financial education can empower employees to assess the required basic disclosures through the lens of fundamental financial knowledge. Only then can 401(k) plans ultimately achieve their true purpose: to assure retirement security.

Without proper education and coaching your company sponsored retirement plan adds little or no value to your employee benefit package.

Please comment or call to discuss how this affects your company benefit package.

  • What ‘Fee Disclosure’ Rules Really Mean for Plan Sponsors (401kplanadvisors.com)
  • DOL tells employers when they must fire advisors to 401(k) plans (401kplanadvisors.com)
  • 401k Plan Sponsors and the Risk of Fiduciary Liability (401kplanadvisors.com)
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