How You May Get “No Respect”, But a Lot of Liability as a Retirement Plan Sponsor

Ary Rosenbaum
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Aside from health insurance, there is probably no better employee benefit than an employer sponsored retirement plan. On paper, the thought that an employee can save for retirement on a tax deferred basis through employee and/or employer contributions is a fantastic benefit. The problem is that many employees don’t understand or appreciate the benefits that an employer sponsored retirement plan can offer. I worked for a law firm that offered a 401(k) plan that gave every employee a fully vested contribution of 5% of their salary and I was amazed that many of my fellow employees didn’t appreciate that benefit. Perhaps I had a better appreciation since my old employer offered employer contributions based on a 7 year vesting schedule. Regardless of the type of a retirement plan that an employer sets up, they usually don’t understand the gravity and responsibility that comes with sponsoring a retirement plan. They don’t understand that many of the issues or problems that go with starting and maintaining a retirement plan including those that they might not even have control over is going to be their responsibility.

A retirement plan sponsor can certainly be like Rodney Dangerfield in getting no respect. If an employer sponsors a retirement plan that is run correctly and allows for a great accumulation of retirement savings, they get none of the credit because as retirement plan sponsors that is what they are supposed to do. When things go wrong for an employer sponsored retirement plan, the plan sponsor as a plan fiduciary is ultimately at fault because the buck stops with them regardless of who committed the transgression under the plan. While plan sponsors may not get any respect like Rodney, it is far more important that they avoid the liability pitfalls that are there for retirement plans sponsors, whether they realize that or not.

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Ary Rosenbaum
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