[OPINION] by Timothy Kelly
According to a research whitepaper released by Market Strategies International (MSI) entitled, “Who Owns Responsibility for Participant Retirement Readiness?”, there may be a disconnect between what plan sponsors see as success and actual measurable results in terms of participant outcomes. Plan sponsors especially are carrying an unprecedented and unfair burden of performance and compliance. That needs to change.
When it comes to running a company defined contribution (DC) plan, plan sponsors have had an enormous responsibility thrust upon them. After meeting with about 100 plan sponsors at the Plan Sponsor University program in 5 different cities in the past two months, I have yet to find one plan sponsor who is solely focused on the company retirement plan or one who has had formal training running a plan. I also can say with confidence that almost every plan sponsor I met had a real passion and desire to create the best retirement outcome for the employees that they serve. There is not lack of desire and passion, however, there is a shortfall in education and an overreach in restrictive and punitive regulation.
Yet, not every plan sponsor has an advisor. Largely unprepared and under educated, plan sponsors need more support, and an advisor is almost an absolute necessity. I would submit that the industry itself is unprepared for the responsibility in front of it. The new DOL Fiduciary rule further confounds the quest for solutions by placing a huge amount of legal exposure on operators of DC plans.
When asking the question of “Who Owns Responsibility for Participant Retirement Readiness?” the obvious comes to mind considering the above statement. The MSI report is a bit more benevolent in its assessment saying:
The Jury Is Still Out. While adequately preparing participants for retirement is rising in importance, there is little consensus on who among plan sponsors, plan providers, plan participants and intermediaries ultimately owns the responsibility of retirement readiness for employees. While nowhere near a majority, the largest portions of Micro and Small plan sponsors lean toward the participant being primarily responsible while Mid-sized plans are about tied between the company and the participant owning the burden of retirement readiness. Among Large and Mega plans, the greatest proportions of plan sponsors cite that the company is ultimately responsible. Across all plan size segments, about one-quarter of plan sponsors point to their respective plan providers to ensure participants are adequately prepared for retirement.
The push towards further regulation may highlight the shortcomings of the current system of DC retirement plans like 401k’s, imposing fiduciary requirements and handing-out penalties for not following the rules, it’s missing the point entirely. A DC plan is a voluntary benefit offered to employees by an employer. Under the current regulatory environment, employers and plan sponsors are taking on enormous legal exposure and are not adequately prepared for the task at hand.
Punishing companies and individuals is an aberration that further confounds an already imperfect retirement landscape. The DOL would serve the interests of all parties by making education compulsory and standardized, not arbitrarily dispensing fines and censure across the board.
