Plan sponsors have a lot to keep up with — but what’s the biggest mistake they make?
Well, according to this week’s poll of NAPA Net readers, the biggest mistake lies in either not understanding their responsibilities (or misunderstanding them), or making bad assumptions about those responsibilities. In what way? Well, in multiple ways, apparently.
The most-cited mistake in this week’s poll was that plan sponsors don’t understand they are fiduciaries. Indeed, a recent survey suggested that a significant, and growing, minority of plan sponsors are unaware of that status.
The second-most cited mistake was closely related, and a concern to advisors: “Thinking that once they hire an advisor, they don’t need to worry about being a fiduciary.”
As for the third-most cited mistake? “Assuming that their providers handle everything.”
Other most-cited mistakes were:
- Not documenting processes.
- Failing to ask, “What don't I know that will inevitably put me at risk?” — then holding the provider accountable for that.
- Lack of fiduciary training and education.
- Not knowing who the plan fiduciaries are and how responsibilities are divided among them.
- Not knowing how much they are paying for their 401(k).
- Not updating plan documents.
- Having an investment/plan committee, but not meeting.
- Having an investment/plan committee meeting, but not documenting the discussion/decisions.
- Hiring an advisor for the wrong reasons.
As for the right reasons, well, advisors not only see what can go wrong, they’re often involved in rectifying those problems. And of course, sometimes they wind up fixing problems that aren’t (yet) identified.
Thanks to everyone who participated in this week’s NAPA Net Poll!
