My kids introduced me to “Whose Line is it Anyway?”— an improvisational comedy with some very talented improv actors like Wayne Brady, Ryan Stiles and Colin Mochrie. When they take the stage together, the chemistry is hilarious. I was thinking about the title, though. With such talent, they’re never at a loss for the next line. The title implies confusion — yet there really never seems to be any.
As a retirement plan professional, however, I do see confusion in retirement plan ownership (is it the employer’s plan or the service provider’s?) which causes me to pose the question: Whose plan is it anyway?
Technical versus real life answers
The technical answer is easy. Under ERISA, the plan sponsor is responsible for the plan. However, if you ask a typical participant, rarely will you hear, “I participate in my employer’s 401(k) (or 403(b)) plan.” Rather, you are much more likely to hear a participant say, “I have a 401(k)/403(b) with XYZ service provider.” Many of us have probably also heard a participant in a multiple provider plan say that they have a plan with X and a plan with Y.
While these statements aren’t technically accurate, perception is important. From an employer’s perspective, it’s important to understand — even with multiple service providers — that they likely have a single retirement plan, and their administrative and compliance obligations center on that plan.
Perhaps more importantly, though, is that a public relations and employee communication opportunity is being missed. An employer typically spends time, effort, and good money to make benefits available to their employees. If the objective is to attract and retain talented and qualified employees, shouldn’t the employer be looking to capitalize on the good will created by offering the retirement plan? In addition, employer messaging about how to best take advantage of the plan by maximizing the match, or contributing enough to achieve retirement readiness is a great way to enhance employer/employee good will. Failure to do so may be a lost opportunity.
What about the service provider? Is it their plan? Clearly it is not. While I recognize there is something to be said for branding with participants, a quality service provider will work with the plan sponsor to help them get the PR they deserve for offering the benefit in the first place, and to ensure that participant education gets the plan sponsor’s message across. Unlike the improvisation, these messages can be carefully scripted.
So, whose plan is it? It should be the plan sponsor’s. In the long run, participants, plan sponsors, and the retirement system will all be better off if we work to reinforce the role of the plan sponsor and the value they’re providing to employees by providing a retirement plan.
In addition to blogging here, I also tweet regularly about topics of interest to Tax Exempt plans.
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