Top Challenges Many Plan Sponsors Don’t Recognize

There are many challenges facing plan sponsors, and in a recent blog entry Christopher Carosa has identified the top challenges of which they are not aware.

Understanding the Extent of Legal Liability

“The eye cannot be on two balls at once,” writes Carosa, noting that most plan sponsors “stay focused on their business, not their employee benefits package.” However, he warns, they do so at their peril if that causes them to be inadvertently unaware of legal and regulatory changes that have altered their responsibilities and obligations. 

Carosa admits that this is difficult, remarking, “In a way, paying too close attention might drive plan sponsors crazy. The regulatory arena has been quite volatile of late. This constant state of flux can bewilder even long-time professionals.” And he cites experts who argue that the problem is compounded by plan sponsors receiving bad or insufficient information, as well as service from legacy providers who have not adjusted to the new emphasis on fiduciary compliance.

Proactively Deciding Plan Hardship Provisions

Carosa says that general awareness of hardship provisions has grown, but that doesn’t mean that full awareness of the specifics has. Not only that, he cites expert observation that a further peril lies in not being aware that a plan amendment will be necessary.

Attention to Fees

It is not uncommon for plan sponsors to fail to pay attention to fees, Carosa says. “It may hard to believe, but for all the consideration paid to fees, some plan sponsors appear to have simply missed that memo,” he writes, Not only that, he says that even when they do, there can be uncertainty regarding which fees to look “Even when plan sponsors do know enough to look at fees, there’s a question regarding the fees to which they should pay attention. This can have many consequences, experts observe; among them, losing retirement money itself.

Employee Financial Fitness and Company Profitability Are Connected

Helping employees to be more knowledgeable and giving them access to financial advice can pay dividends not only for employees, but for employers as well, Carosa argues. “The key to success here starts with a sound education policy,” he writes.

But plan sponsors need to be well-educated as well, Carosa says. “This education applies to the plan sponsors themselves, as there’s a temptation to give other benefits a greater priority than the retirement plan,” he warns, and cites expert opinion that they need to understand that there is a direct correlation between lack of preparedness to retire and other costs, such as those related to stress and aging.

Plan Sponsors Not Knowing What They Don’t Know

The greatest challenge plan sponsors don’t know they’re facing may be that they don’t know they’re facing challenges in the first place, Carosa suggests. “Expecting the unexpected and properly preparing yourself remains a successful strategy in nearly all endeavors,” he posits.