Friday, March 26, 2010
Is Your Employer 'Wimpy'?
When was the last time you had something happen that really pissed you off - but you were also extremely thankful for it?
First, if you are offended by the word "pissed", I apologize. I use that word to get your attention and it does a much better job of describing my feelings in this case than "angry" or "mad". I was "pissed" because I witnessed some real wimpiness from an employer.
I did a 401(k) plan review for a local small business recently. These reviews are to help employers to look at their retirement savings plans and find places where they can improve. The goal for everyone is to lower their fees, reduce their liability, and provide better education for employees as well. Everyone wins!
So what pissed me off? My contact person at the company ABSOLUTELY DID NOT CARE!! It doesn't bother me if someone doesn't know their 401(k), and wants to learn. It bothers me greatly when you don't give a ****. She wasn't even the owner, but a rather small-minded, pencil-pushing "Gate Keeper".
Why am I extremely thankful? Simple. This is one of the main reasons I wrote my book "Help! My 401(k) Has Fallen - And Must Get Up!"
There are some wimpy employers out there, and this "Gate Keeper" (I'll refer to her as G.K.) was a vivid example of what's wrong with many 401(k) plans today. She is part of a 3 person 401(k) committee, which also included the company president and V.P. The first part of my review is a questionaire and gathering information about the funds in the plan.
Money Magazine Senior Writer Penelope Wang wrote a recent article "Make the Best of a Bad 401(k)" . She points out that "even the nation's biggest 401(k) plans fall short in some key areas".
Employers must understand that they have a fiduciary responsibility to their employees. If a retirement plan is offered by the company, it needs to include the best possible mutual funds at the lowest possible cost. Also, employees must be kept well-informed about how the plan works and what the benefits are.
Fiduciary responsibility is not just a "good idea". Its the law, part of the Pension Protection Act of 2006, and recent updates to ERISA (Employee Retirement Income Security Act). Companies may be exposed to potential lawsuits by not doing their best for their employees.
Let's get back to "G.K." Here are some of the highlights (or lowlights) of her responses to my questions about their plan.
Q: How often does the trustee committee meet to review the plan.
A: We let the advisor take care of that.
Q: Are all 3 members of your committee aware of the meaning & responsibility of being a 'fiduciary'?
Q: Are you also aware of potential personal liability which comes with fiduciary repsonsibility?
A: Well, that's what we have insurance for.
Q: How does your company help the participants in the plan to make informed investment decisions?
A: Information is available on-line and they can call the advisor.
Q: How often does he meet with your employees?
A: I think once a year. People can call him if they have other questions.
Q: What process do you use for monitoring the mutual funds in the plan for performance and expenses?
A: We rely on the advisor for that.
Q: Do you have a current enrollment kit?
A: (She handed me a packet from 2008 - NO KIDDING, I couldn't make this stuff up!)
Q: Do you have a more current kit?
A: Our advisor needs to get us some new ones. We haven't had any new employees so it hasn't been
Q: How are employees kept informed of mutual fund expenses?
A: We rely on the advisor for that.
There is more, but you get the idea. People like G.K. just don't get it. Her small-minded attitude costs her company money. She is also depriving the employees there of their rights to learn more about their benefits and their rights to better investments. (I will talk about this in the next segment. Stay tuned - it gets MUCH WORSE when we review the investments.)
The bad news is that there are plenty of G.K. s out there. If I were an employee at this company, I'd either want a different person in charge of the 401(k) plan or learn what my legal options are. G.K. is a time-bomb.
You can contact me at http://www.helpmy401k.us/ . Pick up your free report on my website – "The 5 Biggest Problems With 401(k) Plans – And How to Fix Them". My new book, "Help! My 401(k) Has Fallen - And Must Get Up!" is due out in April.
My weekly financial advice program, Improving Your Financial Health is on Blog Talk Radio and Saturday mornings at WHME-FM.