401k Participants – Who Should Educate them? At a TPSU program held at the University of Chicago’s Gleacher Center, the controller of a 250 employee company voices frustration about not understanding the roles of the various providers when it comes to employee education and communication.
The controller knows that her employees need financial education but she is not sure whether the record keeper, third party administrator (TPA) or plan advisor should take the lead. In fact, she’s not really sure what their roles are which is common among 401k and 403b plan sponsors in what is an unnecessarily complicated system.
The confusion makes it difficult for the plan sponsor to orchestrate the various service providers who may not be working together in an integrated manner.
The ideal scenario? Employees should understand who they can turn to for education and advice. The website should clearly outline the various roles of each provider. Ideally, the vendor providing education is impartial not affiliated with the investments being recommended and willing to act as a fiduciary to avoid the appearance or reality of selling a product.
Other lessons learned at TPSU: her role as a fiduciary under ERISA and her responsibilities to the company and their employees. She was also intrigued by discussions about HSAs (health savings accounts) becoming more prevalent due to the growth of high deductible healthcare plans (HDHC) which are triple tax-free and could become more popular as HSA contribution limits could be increased under the new tax budget.
EBRI estimates that a couple retiring today needs to have $392,000 saved if they have more than normal prescription needs; by 2025, healthcare is expected to consume 90% of social benefits for people retiring.
Seems like we will need even more education for 401k and 403b plan sponsors about other benefits like HSAs and the DC-ization of healthcare.
