Jim Phillips, a plan advisor in Massachusetts and contributor to The Wall Street Journal’s Marketwatch site, calls the DC industry on the carpet for the confusing jargon we use when dealing with plan participants and sponsors. And he’s not talking about Monte Carlo simulations or hedging tail risk — he’s talking about really simple terms that we might assume everyone understands. For example:
• “Contribution” means a gift to someone else.
• “Match” is a sporting event. (And while we’re at it, wouldn’t it be better to translate 50% of the first 6% into an actual dollar amount for each participant?)
• “Deferral” means delay.
• “Allocation” can describe something in short supply.
• “Election” implies voting.
• “Roth” – with all due respect to the late Sen. William Roth, why not call it “after-tax”?
• “Enroll” is what we do in school — why not use “join”?
• “Distribution” is the system Walmart uses to be efficient.
While we’re at it, what does “plan participant” mean? Perhaps “saver” or “investor” might be better. And worse of all is “plan sponsor” — how many companies really like being in the business of sponsoring a retirement plan? Wouldn’t “employer” be better? One person commenting on Phillip’s blog noted: “If average employees cannot understand these basic terms, they have worse problems ... good luck to them...” Sounds like something out of Charles Dickens. Are there still poorhouses?
