How Plan Sponsors Can Protect Retiring Employees


What is the role of the Sponsor to protect retiring employees?

At a TPSU (The Plan Sponsor University) program held at Loyola University in Maryland, Adjunct Lecturer Jania Stout explains how plan sponsors can help protect retiring employees solicited by advisors. The question came up at the program by a plan sponsors who asked what he should say to his employee being solicited by an advisor to buy an annuity.

Jania notes that this is a common issue as many advisors focus on retiring employees to help them with their rollover options as well as the plethora of radio and television ads soliciting retirees. But plan sponsors have to be very careful about not giving advice and are sometime put in a difficult position. Jania recommends a DOL Fact Sheet entitled, “How to Tell Whether Your Adviser is Working in Your Best Interest: A Fiduciary Guide for Individual Consumers” which her firm has adopted and added additional questions.

Though plan sponsors should not provide answers, it can be important to just know the right questions to ask.

The new DOL rule will change the way that advisors interact with retiring employees whether that advisor works on the 401k or 403b plan or not. Concerned about protecting retiring employees that do not have the benefit of an ERISA fiduciary selecting and monitoring funds, fees and advisors, the DOL rule is intended to help investors by forcing advisors to act in the best interest of the investor. Just as plan advisors acting as co-fiduciaries on DC plans must receive level compensation meaning that no matter which investment they recommend, the compensation is the same, the new DOL rule will require level compensation for advisors working on IRA rollovers. This rule may help avoid situations where an advisor recommends high commissioned annuities over other investments that might be in the best interest of the client, even if it is another annuity.

Though the new DOL rule affects advisors more than plan sponsors, it will change the relationship dramatically.

Fred Barstein

Fred Barstein

Founder & Editor-in-Chief at 401kTV | TRAU | TPSU
Fred Barstein is the Founder & Editor-in-Chief of 401kTV. Fred is also the Founder and CEO of The Retirement Advisor University (TRAU), a collaboration with UCLA Anderson School of Management Executive Education and The Plan Sponsor University (TPSU).Mr. Barstein was also Founder and Editor-in-Chief of NAPA Net.
Fred Barstein

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