Get the Retirement Plan Monkey Off Your Back
Never before have retailers faced such daunting challenges. Customer spending habits and expectations are changing radically; product strategy must straddle online as well as brick and mortar; employees are either working from home or must be tested onsite; and trade tensions threaten supply lines. C-suite executives, who also find themselves working remotely, are being pulled in multiple directions.
Some storied names have already filed for bankruptcy protection while others see it looming on the horizon. No one’s business plan is unaffected.
If these challenges aren’t enough, the COVID-19 pandemic has also ratcheted up the complexities of managing retirement plans. The unprecedented volatility afflicting most all asset classes challenges many long-held assumptions and industry norms. The onerous duty of internally overseeing these retirement plans diverts managerial energy and resources from the vital function of executing ever-changing business strategies. At this moment, the retirement plans largely serve as a distraction from the corporate task at hand: survival.
Retail executives, however, are not shackled to these distractions. ERISA neither requires, nor mandates, that plan sponsors manage or engage in continuous oversight of their plans. In fact, ERISA allows for enormous flexibility in the management and oversight of retirement plans. There is no requirement in ERISA that corporations or committees of a corporation, serve as the fiduciaries of their plan. So, why does the current model of retirement plan management continue to embroil the valuable limited resources of corporate managers?
While it’s true that ERISA allows for great flexibility, it’s also true that ERISA is a demanding task master. Hundreds of pages of regulations and 40 years of case law call for and require heightened expertise and compliance. While government enforcement lies with the Department of Labor (DOL), an active plaintiff’s bar also continually scans the horizon looking for lucrative class action lawsuits. These lawyers are sophisticated and diligent. They are also fiercely determined.
A clean and elegant solution lies close at hand. Corporate managers can easily remove the retirement plan monkey from their backs.
Plans can simply delegate fiduciary responsibility to an independent fiduciary firm. Professional fiduciaries whose core competency and expertise lies in the oversight and management of qualified retirement plans will exercise best fiduciary practices, thereby assuring compliance with ERISA. As companies now need to devote all of their resources toward adapting business models to a new economic paradigm, there is no justification for C-Suite executives to retain oversight of their retirement plans, or the potential exposure to personal liability associated with serving as an ERISA fiduciary.
This solution is not to be confused with the suggestion that certain corporate functions be merely “outsourced.” Property management, information technology, and various accounting functions can be performed by others in exchange for a fee, and corporate management can rely on this. However, the designation as a fiduciary is a delegated responsibility which carries with it certain statutory obligations imposed by ERISA. A fiduciary has discretion to exercise authority over a plan and is charged with a duty of loyalty to the plan participants, effectively precluding the fiduciary from engaging in acts of self-dealing or conflicts of interest. Importantly, fiduciaries must act as prudent experts and failure to meet these fiduciary standards can result in personal liability. No “outsourced” function carries this responsibility.
All of this begs the question: Why take the risks inherent in this widely accepted, old school, model of retirement plan management and oversight? This model has been broken for decades. It doesn’t serve plan sponsors, and it doesn’t serve plan participants. A new model of delegating plan oversight, management, responsibility and risk, to an independent fiduciary, benefits everyone involved.
Our rapidly changing economic landscape threatens the future of many corporations and it demands an innovative response. An attitude of “but, we have never done that before” is simply a luxury of the past which can no longer be indulged. Every professional hour devoted to retirement plan oversight, is one less hour devoted to ensuring your company’s survival.