Category: Retirement Planning

Have you ever purchased something and came away from the transaction unsure of whether you received a good deal? I can recall a situation where I was left feeling just that way.

At 22 years of age and fresh out of college, I was involved in an accident that totaled my small pickup. It was the only source of transportation I had known since turning 16 years old. After all of the insurance paperwork was filed and the claim was adjusted, I set out to find a replacement for my deceased truck. After searching for several days through countless car lots, I found a used truck that seemed to call to me to purchase it. It was a cherry red, full-sized truck. I decided that I just had to have it. In looking back now, I probably acted a bit hastily and did not research the purchase very well. I ended up negotiating the purchase of a vehicle without knowing the true value of the truck, the different components that were available compared to similar trucks, or understanding the special terms in the financing contract I was entering. At the end of the process, I couldn’t tell you whether it was a good deal or not.

This one can be tricky! What should comprise a plan sponsor’s review of the various persons and companies providing services to their plans and plan participants? The review is made tricky by all of the outside influences that can often creep into and cloud what is needed during the review. Due to the public nature of 5500 filings, plan sponsors are no doubt bombarded by prospective suitors for the plan’s business. People calling themselves vendors, TPAs, providers, mutual fund companies, insurance providers, accountants, attorneys, advisors, consultants, 3(21) fiduciary advisors, 3(38) money managers, directed trustees, custodians, benchmarking services, publications, etc., are all vying for the opportunity to serve plan sponsors’ needs. Further, the very nature of the defined contribution retirement plan and its ever-evolving rules, regulations, litigation, and regulatory oversight create a deluge of information a plan sponsor must sift through. With so much information and marketing pitches coming from so many directions, it can often overwhelm plan sponsors to the point of inaction.

Most retirement plan sponsors understand that they should conduct a review of their retirement plan. However, when confronted with the question of what should comprise this review, the responses are often varied from plan sponsor to plan sponsor. The responses range from “we have service providers that take care of that” to “we periodically entertain proposals from other service providers to ensure our plan is with the correct provider.” When it comes to the duties of plan sponsors, there are clear guidelines and best practices that are available to guide them in the oversight of their retirement plans. We will discuss some areas that should be considered when conducting reviews.