It's been a minute.....Terrible Plan Sponsor Behavior Still Persists

Okay folks, I know it's been a while since the last time I wrote on this blog.  Most of the content that I've created over the last 3-4 years ended up published on my employer, Unified Trust's blog and candidly, I'm not sure if this will be a one and done post or if this kick starts a new period of creativity.  But today, something happened that fired me up and I don't believe that the content following would fit over on that blog.  So here goes; 

Terrible Plan Sponsor Behavior Still Persists

Within the Retirement Plan industry we're always trying to coach practitioners and their Plan Sponsor clients on best practices.  Those practices can be practical, i.e. how do we make it easier to run a retirement plan, compliance related; how do we follow the rules OR they can be of the fiduciary nature, procedural and in the best interest of the participants. 

So, what I want to know is HOW in the year 2020 is the following scenario STILL happening????!!!

Earlier today, I received the news that a client who we've had for 7+ years was leaving.  Naturally I was disappointed to learn of this.  They were a good client, never complained and to our knowledge, generally happy.  We were even told as they left that they loved working with us.  This made sense to me, I remember when we first took this client over, they were in the middle of a very painful IRS audit and came pretty close to disqualification.  We helped them through that and were rewarded with a good, somewhat long term client.

Given that background, we asked, why are you leaving?  And the answer was frustrating, a little surprising (but not very), very sad to me as a 25 year industry veteran and fiduciary practitioner.  The client was taking the plan to another vendor (who will not be named here) along with a broker who is most definitely not a retirement plan specialist. The broker happens to reside inside of a large national bank, and while we don't have written evidence of this, we've been told that moving the 401(k) plan was a CONDITION of the employer receiving a bank loan.  That's right, those are the words used, a CONDITION!  In other words, "move us your 401(k) plan OR you don't get the money you need to run your business".  Well, what's the employer to do?

I'm probably writing to an audience of no one but myself, but 'Self' I say, this here is a prohibited transaction and it's not even a new or creative one.  It's as old as 401(k) plans and yet in 2020 it STILL happens.  This is happening in a time when fees have been and continue to be compressed, fiduciary rule making to "protect participants" comes and goes and new structures like Multiple Employer Plans are being constructed to help provide new and better benefit mousetraps.  Yet, the lowest practice of twisting, and leveraging still happens and goes unchecked.

So, I write about it, it's off my chest and I hope that someone reads it knowing that this situation is wrong, yet still common. After all, it's already a practice that violates the ERISA, so what it to be done?  I ask..........

- Jason Grantz, QPA, QKC, QKA, AIFA