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What Keeps Plan Sponsors Up at Night?


401k fiduciaries have a lot that can keep them up at night. The first step to being comfortable in your position is understanding your role. Here are three of the top concerns fiduciaries have in managing their company retirement plan.

What Keeps Plan Sponsors Up at Night?

Welcome back to Five-Minute Fiduciary. If this is your first time joining our weekly whiteboard, we have one goal, to provide good content to plan sponsors and administrators in five minutes or less once a week.

Some of the greatest things in life have great responsibilities tied to them. Having my first kid was both exciting and terrifying. I was excited to have this bundle of joy, but I also knew that it carried with it a lot of responsibilities. Not only was I lucky enough to have people step in and help me understand my role, but I'd been taught it along.

Most of the time in the retirement plan world, we don't have that kind of luxury. Rather than having someone pat us on the back and say, "Well, son, let me tell you what it's like to file your first 5500." If you're like most plan administrators, you had to learn that on the job.

Because of all the responsibilities as a plan sponsor, there's a lot of things that can keep you up at night. Here are three common concerns. In the words of Inigo Montoya, "You keep using that word, I do not think it means what you think means". In the retirement plan world, the word people use, that generally doesn't mean what they think it means is fiduciary.

I'm not going to get into the ins and outs of being a fiduciary right now. We have other whiteboards that go over that. What I do want to point out is there was a recent study done by JP Morgan Asset Management that illustrated how much people don't understand this word. In the study, they found that 43% of fiduciaries don't even realize they're fiduciaries. In another survey, 57% of respondents indicated that fiduciary responsibilities were the top concern that kept them up at night. These are valid concerns as there are a lot of responsibilities that come with being a fiduciary on a retirement plan.

One of the second largest concerns I see is fees. It's funny how easily we can feel ripped off when we, for example, go to get gas and a block away we see a gas station that selling it for a couple of cents cheaper per gallon. The differences between that and, say a retirement plan is 1. This is people's life savings. This is what they are going to be using to live off of and pay their bills in retirement. And 2. fees directly impact the amount of money that's there to grow and compound for retirement.

If you do a quick internet search, you'll see that there are plenty of excessive fee lawsuits out there, many of which indicate that there was a breach of fiduciary duty to act and prudence in deciding the funds and the record keepers and keeping the fees in check.

The third point is financial wellness. And I think this is a good thing for plan sponsors to be keeping in mind. This is a new trend that's been top of mind for plan sponsors. And I hope it grows because while it's not the plan sponsors responsibility to make sure people make good financial decisions in their households. It can go a long way for plan sponsors to give the resources and the tools for participants and employees to make sound financial decisions that are going to impact not only their retirement but their current situation.

There are plenty of other concerns that come up for plan sponsors and administrators. But these are some of the things I see quite a bit. I feel like a lot of things are more manageable when you understand them better. This is why it's so critical for plan sponsors and plan administrators to be up to date on the trends and the changes when it comes to retirement plans. I hope this whiteboard helps you sleep a little bit better tonight, or at least gets you thinking. If you'd like a second opinion on your 401k plan, please reach out to us. We have additional whiteboards on YouTube at CUI Wealth Management. Please keep in mind that this is not intended to be tax or legal advice. If you need tax or legal advice reach out to the appropriate person Professionals.

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