The retirement system in the USA is the responsibility of every business owner with employees. We cannot rely on the government for our financial future. Relying on the conventional financial institutions is a mistake and will only hurt your employees and increase your risks.
The flurry of enacted and proposed band aide fixes will go part of the way to improving the retirement landscape. But, regulations, legislation and the threat of court action can only go so far. The various fixes provide information and guidance to plan fiduciaries, but by themselves can’t make them better fiduciaries. The plan sponsor must either develop fiduciary practices and procedures or delegate them to someone that can. Plan sponsors are in the business of making widgets or delivering services. Acting as a fiduciary and developing appropriate procedures and practices is generally outside their skill set, and a distraction from their primary interest of running a successful business. Frankly, few businesses rise and fall based on the quality of their 401(k) plan. I’m not suggesting for a moment that they don’t care. Nobody wants to have a crummy retirement plan. Most employers would want for their employees to receive maximum benefits for each dollar set aside. But, wishing won’t make it so. And leaving it to a product pusher that “takes care of it all” is unlikely to generate a quality plan.Long experience indicates that plan sponsors can’t rely on the payroll service/insurance company/brokerage house/or fund company to overcome their deeply embedded conflicts of interest to fix their plans. Those sales entities have little interest and strong disincentives to fiduciary behavior. Most of them absolutely prohibit their agents from accepting fiduciary responsibility. Fortunately, plan sponsors can delegate much of their responsibilities and shed most of their liability to an outside independent investment advisor that will accept fiduciary status in writing (technically ERISA 3(38) Fiduciary).
This article is spot on. If plan sponsors want to avoid government intervention they must take control of their company retirement plan. The 401(k) system can be fixed but not by the financial institutions listed above.
Please comment or call to discuss how this affects you and your company.
- Momentum Builds to Place IRAs Under Fiduciary Umbrella (401kplanadvisors.com)
- The Use of ERISA § 3(38) Investment Managers in Defined Contribution Plans (401kplanadvisors.com)
- Action Can Reduce Fiduciary Risk When Stock Markets Swoon (401kplanadvisors.com)