What’s being said to your employees by your record keeper’s call center could lead to increased fiduciary liability according to one of the industry’s leading attorneys, especially when it comes to distributions. Plan sponsors have a duty to monitor what is being said to their plan participants especially as more record keepers look to mine plan participants for IRA rollovers and sales of annuities and could be liable if the information is misleading or biased.
Regulators have stated that communications to employees by record keepers call centers should be clear, comprehensive and unbiased but that’s not always the case as revealed by a 2013 GAO (Government Accounting Office) investigation. Some IRA service providers gave sales oriented and misleading information, especially regarding fees, which could lead to liability for the employers if they selected the firm to provide record keeping services.
So what can plan sponsors do?
- Ask their record keeper if they are providing distribution guidance and, if so, do they offer a proprietary service.
- Review the scripts used.
- Look at the data of how many participants use the record keeper’s distribution service.
- Call the record keeper acting as a participant and see what they saw – as the GAO investigators did – you might be surprised.
- Prohibit record keepers from cross selling proprietary products or those that generate a referral fee.
