This week we asked NAPA Net readers to characterize the level of engagement of their plan sponsor clients with their retirement plans. Let’s just call it a work in process.
Let’s admit it: Plan sponsors have a demanding job, dealing with sensitive participant issues, complicated regulatory requirements and the ever-present overhang of personal liability. But then, so do those who work with them.
First we asked readers to describe their plan sponsor clients’ level of involvement with their retirement plans. The most common response, cited by just over half of this week’s respondents, was: “Pulled in a lot of directions.” Roughly a quarter were “interested but distracted,” while the rest split nearly evenly between “engaged and intelligent” and “going through the motions.”
Time Spent on Retirement Plans
As for how much time those clients’ time and energy is spent on retirement plans, the overwhelming response — nearly three-quarters — was “much less than half.” The rest cited “less than half.” Although one reader explained, “For most of them, it’s ‘as little as possible’ and still get everything done. Or in some cases not get everything done…”
Have respondents been successful at shifting those dynamics? Well, a plurality, 37.5%, said that while for some of their clients it had increased, but for others decreased. That said, a quarter noted that it had increased; half that number said it hadn’t changed; and one in eight said they weren’t sure. However, decreased time spent may not necessarily be a bad thing. As one reader explained, “Our marketing efforts are directing employers into multiple employer plans. As an adopting employer, they have less duties and less risk than they would have as a traditional plan sponsor. We believe that this strategy represents the future of the smaller end of the retirement plan market.”
Another reader noted, “Employers, especially in the smaller end of the marketplace, generally want to handle the company 401k in much the same manner as they handle all of their other benefit programs... they pick a provider/carrier, and that company handles all the details of that particular program. The provider assumes responsibility (and liability) for doing the right things so the employer can concentrate on running their businesses instead of their health plan, workers comp, and now the 401k. The employer typically reviews each benefit program on an annual (or more frequent) basis to ensure that the provider is still meeting the objectives of the company and their employees. An employer can achieve this type of result in their 401k plan structure by utilizing a multiple employer plan that is overseen by experienced industry professionals.”
On a more fundamental level, we also asked readers if their plan sponsor clients knew they were fiduciaries. Just one in eight said that all of their clients did, though nearly two-thirds said that most of them did. The remaining quarter admitted that just “some” of those clients knew (though goodness knows, they had tried to tell them).
Fiduciary Awareness
As for the impact they had on that realization, one in eight said their clients knew they were a fiduciary when they were hired. A quarter said they knew, but didn’t really realize what that meant. And roughly half said that some clients had known, and the rest hadn’t known.
We’ll close with the cautionary comment of another reader: “We are finding that bundled providers are promising to remove fiduciary responsibility from plan sponsors at reduced expense and drawing away our business. Much of this has to do with the myriad of required notices, and then lots of folks think they have to find the lowest asset fees (even though the DOL has specifically indicated that is not the case). In many cases a full-bundled investment provider will claim they can remove all fiduciary responsibility from the plan sponsor. Then the client ends up with inaccurate testing, incomplete or late filed 5500s (or none at all), and inelegant plan design as well as other issues that in my opinion are not worth the trade-off for not having to mail a fee disclosure themselves. Not to mention the responsibility for all of that still falls on them — the plan sponsor. Sometimes those clients come back after a few years so we can get them out of the mess their plan has become, but in most cases I think the plan participants end up worse-served as a result of the plan sponsor trying not to be a fiduciary.”
Thanks to everyone who participated in this week’s NAPA Net reader poll!
Got a question you’d like to ask NAPA Net readers? Post it in the comments below, or email me at [email protected].
