Several
weeks ago, we posed the question, “Does caring = compliance?” Of course the answer is "no."
But the point was simply
that if plan sponsors show genuine concern for the well-being of plan
participants, much (if not most) of their compliance challenge will fade away. It’s
really not that technical, difficult or costly to eliminate the most common
causes of failed discrimination tests in 401k plans.
A subset of
that genuine concern, yet perhaps a bigger issue, is fiduciary responsibility. As a plan sponsor, your obligation as a plan
fiduciary – in effect, caring for your
participants’ contributions – is literally codified in the law. You don’t really have to agree to care – the
law just declares it for you. Service
providers might agree to accept fiduciary liability for the plan (or not) – but
at the end of the day, the obligation rests with the plan sponsor. You really
can’t avoid it. Is this something to
fear? We don’t think so – but only if
you really do care about protecting your participants’ money.
Let’s face
it. In most plans, virtually all the
money belongs to participants. It’s
their money that’s being invested and they are likely paying the lion’s share
of plan expenses too. Have you done
everything you can to make sure they are getting the best deal? That they are not paying too much? That they’re able to maximize the return on
their investment?
When they
make the decision to save for their retirement in your plan, employees are
trusting in your due diligence. You’re
their sword and shield. You’re their
knight in shining armor. But thy name be not Lancelot. Thy name be Fiduciary! All
the responsibility, none of the glamour, right?
The spate of 401k-related lawsuits is
marching relentlessly toward what will likely be seen as a “sudden revelation”
when it occurs: The “discovery” that the predominant plan investments,
actively-managed mutual funds, and all the expenses loaded onto them are NOT
REASONABLE. They are omnipresent, but
they are not reasonable. A true Lancelot
would slay this dragon…..now.
The latest marquee lawsuit has Mass
Mutual’s participants suing their plan over hidden and exorbitant plan
expenses. Fidelity’s participants are suing their plan as well. You can Google the specific complaints but
your plan likely is no better off. If
their attorney knows what he’s doing, the relative performance and cost of the
Fidelity funds in that plan are going to get pounded -- and all the facts will support
the plaintiffs’ position. The Mass Mutual case goes to a different place
on fees and could be a bellwether, because the complaint addresses the murky
practices of internal revenue-sharing (read hidden compensation) that exist in
virtually every insurance company-based plan, including yours.
Your 401k provider is almost certainly
telling you your fees are reasonable.
Heck, they may have given you a 33-page disclosure document to prove it. Even a giant
dragon can hide if the fog’s thick enough!
But participants are increasingly seeing through the fog and just the bringing
of lawsuits proves one thing:
Participants are willing to take up arms against the dragon, even if their
Lancelot is not. And if thy name be
Fiduciary, thee go down when the fight begins.
Who even cares what happens to the dragon? He deserves his fate.
The good news is that if you care, you
can squash the dragon like a bug! And your participants may even be inclined to polish your armor or put you up on a white horse.
