One of the big issues for professionals in the defined contribution (DC) industry is understanding that their clients really don’t have to time or training to get a full grasp of how the Retirement Plan Industry works and how all the pieces fit together. They sometimes mistakenly think they understand.
There are a lot of assumptions and industry jargon that can confuse people who might have many more jobs than just running their company’s retirement plan. The CFO of a 650-person healthcare plan attending a TPSU program at Thunderbird Global School of Management voices his frustration and concern.
Very small businesses think that larger companies have the time, resources and knowledge to fully understand how their 401k or 403b plan works and HR people believe that finance people intuitively understand. But the CFO at the healthcare organization was frustrated because he kept getting pieces about his company’s 403b plan but he knew that he didn’t really get the entire picture. He could not find a good source that filled in the blanks and give a good overview.
TPSU offered him that opportunity party because of the lecturers and presenters but mostly because he got to speak with colleagues which assured him that he was not alone and that other people like him struggled as well. The CFO also valued the discussion about revenue sharing as well as how to fulfill his fiduciary duties by running an effective investment committee.
Helpful was the use of a healthcare analogy to understand how all the parties that are vital to running a DC plan interact which include:
- Advisor = Doctor
- Record Keeper = Hospital
- Investments = Pharmaceuticals
The plan sponsor is the parent or fiduciary of the patient who is the employee in the plan sometimes called the plan participant. Jargon can be a problem because some people call the record keeper a platform which actually happened at the Thunderbird TPSU program.
It’s essential for plan sponsors to get the big picture of how 401k and 403b plans work so that as different elements are introduced, they understand how the pieces fit together. It may take formal training but it can be worth it if only to know that you are not alone.
