Issues with Hiring a Mutual Fund Company as Your 401(k) TPA.
Some stuff to think about.
 In England, British breweries own many of the top beer pubs because watering holes are an effective means of beer distribution. If a business can control the method of distribution of their own products, they can expand the distribution while saving a couple of shekels by avoid having to pay a third party to distribute. The problem with producers controlling their own method of distribution is that it can lead to abuse. That is why in 1948, the Supreme Court of the United States in an anti-trust case forced the motion picture studios to divest their holdings in movie theaters because specific theater chains showed only the films produced by the studio that owned them. In the 401(k) retirement plan space, the top mutual fund companies and insurance companies offered bundled retirement plan services where they serve as the plan's custodian, third party administrator, and top choice of plan investments. Bundled 401(k) services offered by a mutual fund company or insurance company can be a great fit for some plans, but not all, and there are some issues that retirement plan sponsors should consider when considering a bundled TPA.
For the article, click here.
|
|
|
Tales of a Former TPA Attorney.
This is a true story.
 I was very lucky that when I started as an ERISA attorney in 1998, I worked as a staff attorney for third party administrators (TPAs) because it gave me insight and experience that I could never have gotten as an attorney working for a law firm. Over the first 9 years as an attorney, I was able to see the good, the bad, and the ugly of the retirement business, so that knowledge can be used to help my plan sponsor and retirement plan provider clients. I always compared myself to my late uncle who worked for a meat provision company who we trusted for advice in which hotdogs to eat, so I can tell you which TPA a plan sponsor should use. This article is about some of the many things I saw with advice on what plan sponsors should be avoiding in using a TPA.
To read the article, please click here.
|
I's a long list.
 In the Nelson Algren novel, A Walk on The Wild Side, there are 3 important rules of life to follow: "Never play cards with a man called Doc. Never eat at a place called Mom's. Never sleep with a woman whose troubles are worse than your own." When it comes to important rules of life for plan sponsors, there isn't much eloquence out there. There are quite a few retirement plan professionals out there that plan sponsors should avoid just like playing cards with a man called Doc. So this article is about which retirement plan professionals that most retirement plan sponsors should avoid.
To read the article, please click here.
|
|
Good Plan Sponsor is the key to a Good Retirement Plan.
It solves most issues.
 was a fit at my old law firm sort of like how my son's toddler clothes fit him at age 7. I wasn't a good fit because I didn't take myself too seriously, I tried to push for flat fee billing, and I tried to break down difficult retirement plan concepts into Basic English for my clients and for the financial advisors that I was working with. The way I empathized fiduciary responsibility for plan sponsors then and now is that it isn't brain surgery and clearly that's a threat when you have to charge $300 an hour for that legal advice because when you charge a premium, you can't make the advice that much basic.
The fact is that like keeping a healthy mouth, keeping a healthy retirement plan doesn't take that much work. It takes dedication and time, but ultimately, a successful retirement plan always requires one constant: a plan sponsor that takes their fiduciary role seriously. So a plan can have the best providers out there and the best fund lineup out there, it's still probe to problems if the plan sponsor is negligent in their duties. A plan sponsor committed to fiduciary responsibility is the one constant for having a great retirement plan.
|
Arrogance is a bad trait for a 401(k) plan decision maker.
It's really bad.
 Regardless of the business you're in, one of the worst thing you can do in being the decision maker for your retirement plan is that you know better than most retirement plan professionals.
No plan sponsor likes to get the unsolicited phone call from the retirement plan professional that their plan is too expensive or that the funds should be replaced. However, when you keep on running a plan so poorly, maybe the problem could be with you and there is nothing wrong with admitting that you could use some help. Retirement plans are completely different from any type of business or human resources function, so its OK to seek help. The worst thing you can do is think that you know best especially when you don't have the background to make an educated decision.
I have always mentioned the certain issue of a former human resources director at a former place of employment. She clearly runs the human resources department as her own little fiefdom. I assume that, because her poor management of the firm's 401(k) plan would get her fired at any place else. The 401(k) plan was poorly run before I arrived at that firm. The 401(k) plan offered no investment education to plan participants and investment options weren't changed in a decade because there was no financial advisor retained by the firm. While I suggested interviewing certain TPAs or selecting certain financial advisors, she knew better than I did. Of course, the plan is still poorly run. I know that for a fact because I was recommended by outside advisors to help them with a severe plan error. Of course, the human resources director can hold a grudge (I did lambaste her for the past 4 years) and my offer to help was rebuffed. Her management of the 401(k) plan has always led to problems with the 401(k), so how good is it? It would be better for her to have hired a fiduciary who can assume a good chunk of the liability of the fiduciary process of the plan and the day to day administration, but she knows best. She would rather stand Pat, than improve the plan.
Arrogance may work in business, but it is a character trait that spells doom for a 401(k) decision maker.
|
|
You will always need them.
 Plan sponsors aren't the greatest keeper of plan records because as a plan fiduciary, they think they get too many reports, prospectuses, and plan documents. It's a lot of paper to keep, but in a world of mobile storage thanks to scanning, plan sponsors get even less sympathy for all that paper.
Plan sponsors after a certain time can toss out certain reports. A 2001 investment policy statement is of little use now, but all plan documents and amendments should be kept. In most plan audits, the one thing that plan sponsors don't have are fully executed plan documents and that's a problem because an unsigned or undrafted amendments from 1993 can be a problem for the plan sponsor today. If plan documents and amendments are unsigned or missing, the government auditor usually takes the position that they were never done.
So when you get copies of plan documents and amendments to sign by your third party administrator or ERISA attorney, sign and date it the day you get it. Then scan it to make sure you have a copy of it if you misplaced the original. It's just common sense, but most of the time, I rarely see all plan documents fully dated and executed. So get those plan documents signed and dated and put them in a safe place.
|
|
