“See something, say something” is an admonition to be alert for trouble one often finds posted in our nation’s transportation systems – but when NAPA Net readers see trouble in the plans they work with – what do they do?
A plurality (47%) would alert the plan sponsor, while another 21% would alert the provider/TPA, and about 8% would first alert the provider/TPA, and if they didn’t address the problem, then they would notify the plan sponsor. “We alert both the provider/TPA as well as the plan sponsor. All parties need to be aware of the error,” noted one reader.
About 12% said it would depend on how big the problem was, while the rest – being TPAs – said they would take care of the problem themselves. As one said, “Alert the plan sponsor, offer them experienced-based insight, opinions and advice, help them fix it when we can and when appropriate – I am the TPA.” Although another cautioned, “I would have to alert the plan sponsor if it was significant. I am the provider/TPA but I can't just fix it, as I am a directed TPA without discretion.”
That said, one reader said that, “once I actually notified the DOL (a big enough deal, and a ‘client’ that I didn't want any more anyway).”
Meeting of the ‘Minds’
We next offered up a hypothetical situation regarding a meeting/presentation with a client/prospect where the respondent didn’t like the solution presented by one of the other firms represented. That said, the plan sponsor seemed likely to go with that solution, and while it may not be optimal for the plan, that decision didn’t affect your work/role. So, what do you do?
More than half (59%) said they would acknowledge the solution presented, but point out the shortcomings of the solution. Another 15% said they would speak up immediately and present an alternative. The rest were some version of “other”, generally an inclination to bring it up after the meeting, to offer their perspective if asked, or a notion that it would depend on just how “non-optimal” the proposed solution would be for the plan.
“Express reservations at the time if asked,” said one reader, “if not discuss it later in private, possibly even document reservations in writing in case there a future problem is created by the decision they made.”
“Instead of openly debating the issue (there may be circumstances of which I am unaware),” explained another, “I will discuss my concerns with the party offering the solution in question. This gives them the opportunity to explain their reasoning to me and/or allows them to revisit the issue with the client/prospect without embarrassment.”
“I've been in the situation where a TPA (that we don't normally work with) suggests something that isn't in the best interests of the client. We feel that we HAVE to speak up. If and when it blows up, we do not want to get flushed out with the bad actors,” noted another reader.
Still another reader said that they would “Engage in a professional, yet persuasive ‘discussion’ in an attempt to get the plan sponsor all of the information to make the right decision.”
Fee ‘Fie’?
With all the recent focus on fees and fee structures, we asked readers if they were doing (or saying) anything different in their discussions with plan sponsors about the choices on their fund menus. A strong, but slight majority (57%) said “no”, because they were already focused on fee structures and outcomes, while another 25% simply said “no.” The rest of this week’s respondents were split evenly between “yes,” “not yet” and “depends on the situation” – about 6% each.
Changing the Subject?
As for how those fee discussions have changed over the past 18 months, readers had the following comments:
- “We have used inst'l share classes, etc. since practice started; however, we are making the review of share class an agenda item at least on an annual basis. Otherwise, we have always benchmarked fees for clients on an annual basis, promoted transparent fees, etc.”
- “I was at a forward thinking TPA for a long time that was ahead of the curve on all the fee and disclosure issues that that is such an issue now that I have not had to change my messaging to my clients.”
- “We feel as fiduciaries that the plan sponsor needs to be educated so that they can make the right decisions when choosing their service provider. We have always been transparent about our advisory fees, as well as the record keeper’s and TPA’s fees. We also help plan sponsors look at the services provided vis-a-vis the fees. The lowest cost provider is not necessarily the best match for the plan sponsor.”
- “We try to be proactive and get in front of the debate by providing and discussing fee and service bench marking from an independent third party each year.”
- “We share some of the class action filings that have been taking plan to help show why it’s so important that fee be monitored and kept in line. There’s a great deal of risk in not being diligent in this area.”
- “Trying to be more proactive, provide more explanation and reasoning for prices.”
- “We’ve had far more intense discussions about fees, beyond the internal cost. We’ve had far more discussions about platform fees, sub-TA fees, etc..... than we previously had.”
- “Better framework for intelligent decision making (trying to take into account the ‘value’ rather than the gross fees).”
- “As the TPA, I am not really involved with the asset based and/or recordkeeping fees discussions. Usually decisions have been made before we are brought in. But for current clients considering changes we do try to point out ‘you get what you pay for’ and that it is not their fiduciary responsibility to choose the lowest fees but to choose the best service for a reasonable fee.”
‘Difficult’ Circumstances
But then we also asked readers to share the most difficult situation they had been put in regarding an awareness of plan operational issues. Here’s a sampling:
- “Most difficult situation was complicated... participants not enrolled, matches not made correctly, etc. Suggested the client work with ERISA attorney who took them through a thorough correction process.”
- “Takeover of large, ‘messy’ plan with high volume of turnover in HR department and general lack of plan knowledge of anyone associated with the plan sponsor resulted in high level of lack of internal policies and procedures, late filings, etc. Because it was an audited plan (two years old), I worked with auditor to help plan sponsor understand need for and set up internal systems and procedures. As personnel continued to change, I repeatedly explained procedures, and monitored activity that would eventually impact my year-end reconciliations and preparation of Form 5500. In general, it is better to spend a little time advising and following up now than fixing a big problem later.”
- “Discovery of prohibited transactions by the sponsor who was also the broker making commission. First, we brought the issue to their attention. Second, we urged them to seek ERISA counsel in case there was an exemption we were missing.”
- “I worked for a very short time at a TPA and found something wrong in almost all the plans I worked with, not all significant issues but some were pretty serious. In several cases I was told not to bring it up as that might get the client or advisor upset. I always reached out via phone to the plan contact (very delicately) to let them know I identified something and they should be in touch with their ERISA counsel about the issue.... and I started looking for a new position after the first month.”
- “Working with a reference who has been receiving either subpar, expensive or both service and advice that could put him a difficult situation were it discovered by an employee or regulator. Generally, it involves conflicts with the broker(advisor) that is associated with a broker dealer and doesn't do many retirement plans. He generally has a relationship, in some capacity with the plan fiduciary. Many times he’s providing reduced fees or commissions on the fiduciary’s personal account.”
- “I don’t have a specific example but when we do see something we document, in writing, our concerns to the client. If the issue isn’t resolved then, depending on the severity of the issue, we may ‘fire’ ourselves.”
- “Always refer client back to plan document. Point out what the issue is and how it is not what the document allows. Recommend amendment, if that’s an option.”
- “Part of our practice consists of flat fee consultation on ‘best practices’ for a plan. The hardest conversations to have are with plan sponsors who are getting slaughtered in fees from commission-based brokers who don’t really provide any services to the plan. It’s our job to point out the issues and describe the services that a Fiduciary Advisor would provide and benchmark their fees.”
- “Based on an example of how Safe Harbor calculations work, the HR exec in charge of the 401k, without talking with anyone or checking the document, instructed the payroll provider to change the calculation from W2 wages to base pay only; again, without even checking to see what their definition of comp really was. Months later, the error was discovered, the HR exec pointed fingers at everyone but herself... very tense! Definition of comp has been established, corrections are being made, and a plan amendment is being written to bring actions in line with the plan document.”
- “An employer (a TPA) simply ignored its own plan documents, and refused to accept advice on how to fix it (resulting in my contacting the DOL).”
- “Generically, it’s dealing with plan sponsors who won’t take action to fix the mistakes in spite of our recommendations. Or their lack of action actually causes the noncompliance. In some cases we have had them engage an ERISA attorney.”
Thanks to everyone who participated in our weekly NAPA Net reader poll!
Got a question you’d like to run by the readership? Want to know what’s on the industry’s mind(s)? Post it in the comments section below, or email me (anonymously, of course), at [email protected].
