I prepare my own income taxes because my tax LLM degree and years working on ProSeries gave me the experience to effectively do that. When it comes to treating my allergies, I delegate that role to the person with the medical background to handle that. I delegate the things that I can’t handle and keep the things I can handle in-house.
Yet it is amazing how many plan sponsors don’t understand the art of delegation and how delegating some or most of their duties to retirement plan providers who have the background and training to do a better job than the plan sponsor ever can. Whether that provider is a third party administrator, ERISA §3(16), ERISA §3(21), or ERISA §3(38) fiduciary, plan sponsors need to know that there are capable plan providers than can alleviate some of the liability risks that they run by handling some of these roles as a plan fiduciary themselves.
The reason that plan sponsors don’t understand the art of delegation is because they really don’t understand their role and liability as a plan sponsor. They don’t understand their duties and how they have to act prudently in paying reasonable fees and checking on the current plan providers they have in place.
They also may be surrounded by plan providers that thrive in business because their clients don’t know much about what these plan provider aren’t doing and should be doing. Heck, I’ll never forget the law firm I was a law clerk at during my LLM year in Boston. There was this paralegal who was told in her review how wonderful she was until she got fired a week later. Some plan providers laud the plan sponsor because they don’t want to tip them off that there aren’t doing their job very well.
This is not to say that plan sponsors should hired all these numbered ERISA fiduciaries because there are plan sponsors out there who understand their role and handle it effectively.
The issue here is that plan sponsors need to identify their role as plan sponsors and gauge themselves whether they can handle it all and delegate the duties that they can’t. It’s hard to be honest with yourself at times, but a plan sponsor has the fiduciary duty to be honest with themselves and identify what they can do as a plan sponsors and what a retirement plan professional needs to handle. It’s that simple.