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Proactive Steps Retirement Plan Sponsors Should Take.

Stuff Plan Sponsors should do.

Retirement plan sponsors have a lot of headaches and liability because of their role as plan fiduciaries. They can sit back and do nothing, thereby increasing their potential liability. They can also be proactive and take care of the problems now that might be bigger problems later. So this article is about proactive steps that plan sponsors can take to avoid a greater harm down the line.

 

For the article, click here.

 
You Might Have a Problem With Your Retirement Plan When....
Things to look for.

There are so many situations when you know you have a problem like when you forget to shut off the stove before you left home or when your lock your keys in the car with the engine running or you forget to pick your child up at the anointed time. There are quite a few instances when you should know when your retirement plan is in trouble and this article will give you examples of when you have a problem with your retirement plan.
 

To read the article, please click here.

It's the small stuff that does it.
"For Want of a Nail" is a proverbial rhyme that shows that the smallest of action can have huge consequences later down the line, just like a snowball effect "For want of a nail the shoe was lost. For want of a shoe the horse was lost. For want of a horse the rider was lost. For want of a rider the message was lost. For want of a message the battle was lost. For want of a battle the kingdom was lost. And all for the want of a horseshoe nail." When it comes to being a retirement plan sponsor, the greatest threats in breaching fiduciary duty resulting in liability usually comes from the smallest mistakes. So this article is to let you know which mistakes to avoid that are nails that can cause your financial kingdom to be lost.

To read the article, please click here.

 
Mistakes that 401(k) Plan Sponsors Should Avoid, But Do Anyway.
That's how it is.

The Surgeon General's report on smoking was released almost 50 years ago and people still smoke cigarettes. We know the effects of cholesterol, heart disease, and the calorie count at many fast food restaurants, yet their sales are still well. Alcohol consumption (which does have some medical benefits in moderation) leads to impaired driving and abuse, yet liquor establishments are still in business. Thanks to advances in medical research, we know what can harm us. Even with that knowledge, we still do it anyway. The same can be said about common mistakes that plan sponsors commit in their role as plan fiduciaries, errors that increase their liability, but they still do it anyway. So this article is about common plan sponsor errors that plan sponsors continue to do even if they understand the error of their ways.

 

To read the article, please click here

Watch out for Biased and Paid Opinions/Studies.
Be careful who is saying what.
I would say that if that if you ask a retirement plan expert for their opinion, 3,000 experts will yield 5,000 opinions. It's great to be opinionated, but for the plan sponsor, it can be a bit confusing.
The problem in the industry is when opinion is masqueraded as fact in a study that a retirement plan provider has commissioned. For example, one of the largest payroll providers has just offered plan sponsors a study why it's a great way to integrate payroll with 401(k) administration, namely hiring this payroll provider to handle 401(k) plan administration. Does one honestly believe that this payroll provider commissioned a study that's going to say having your payroll provider handle 401(k) administration is a bad idea? Of course not, especially when my articles on the matter are available for free.

Another study was commissioned by a Chamber of Commerce that will not reveal its members that said that changing the fiduciary rule change is going to have 30% of retirement plan sponsors terminate their plan because the rule change will increase regulatory costs and liability. Nonsense. Of course, a brokers association supported the results of the study.


Opinions are important, but understand the role of the person giving it. Is it really impartial or are they really trying to steer you to a certain service or fee arrangement?

They may need a trim.  

We are a nation of over abundance and we should be grateful for that. The problem is that over abundance can lead to a life of excess. We are often told that more is more and the problem is that there are many times where less is more.


When it comes to participant directed 401(k) plans, one of the greatest examples of over excess is a fund lineup.  There are thousands and thousands of mutual funds out there, so many financial advisors and plan sponsors think they should contain as many funds as they can. You often find plans with 20+ mutual funds in the lineup and I once came across one plan with 53 different investment options. Why so serious about this issue? It's pretty simple.


Studies have shown that too many funds on a plan's investment lineup actually lowers the rate at which participants defer their salary in a 401(k) plan. Why? Too many funds, especially in one asset class have the ability to confuse and overwhelm plan participants and overwhelmed plan participants are less likely to defer than those that aren't.

 

The solution? Start pruning a plan's fund lineup. I think 12 are more than enough funds in a lineup, maybe 15 at tops. No need for 25 or 53, there is any reason for three large cap growth funds in any lineup.  Plan sponsors need to have their employees defer in a 401(k) plan for a wide variety of reasons, so why get in the way with too many funds on the investment lineup?

 

Topics:  401k, Benefit Plan Sponsors, Retirement Plan

Published In: Finance & Banking Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ary Rosenbaum, The Rosenbaum Law Firm P.C. | Attorney Advertising

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Ary Rosenbaum
The Rosenbaum Law Firm P.C.

Ary Rosenbaum is an ERISA/ retirement plan attorney for his firm, The Rosenbaum Law Firm P.C.. At a... View Profile »


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