The tangled web of ERISA regulations grows worse each year. Is this too much for companies responsible for maintaining 401k plans?
Education
It’s tempting to turn your attention to your company, some academic theory, or even—hush!—“best practices.” The truth is, as a fiduciary, you only have one job.
This has been the most challenging of best practices. It has evolved over the years from “you can’t do that” to “you need to do that.” What does it take to make it better? Has the technology environment changed in such a way as to address long-standing obstacles.
Here’s the real conundrum faced by 401k plan sponsors: They realize they don’t have the expertise to administer the plan. So, what do they do? It’s only natural they do seek outside help for their retirement plan. The trouble is, not all third parties are created equal. But does the average plan sponsor know this?
Laffer postulated that tax receipts might be increased by reductions in the tax rate because such reductions would bring people out of the underground economy and also reduce the usage of tax shelters. This advice was implemented in President Ronald Reagan’s “Reaganomics,” and it worked to increase tax revenues.
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Plan sponsors ought naturally to know how the plan addresses the needs of their business, but do they really know how to tweak the plan to improve outcomes?
This isn’t a compliance audit, it’s an operating efficiency audit. That covers plenty of ground, from technology to benchmarking the value offered by the service provider.
Eliminating the match and investing a large portion of retirement savings in bonds creates a risk. It may cause the retirement savings to go down in flames.
In the spirit of the season, one might even think of this as “tricking” employees to save. Plans sponsors are already using these tricks.
