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Q: What Do All of These Have in Common?

On March 27th, 2020 the Coronavirus Aid Relief and Economic Security (CARES) Act was signed into law. Watch our video below to learn more from industry-renowned ERISA attorney Joel Shapiro, SVP, RPAG about the impact of this new law on plan sponsors and participants.

As we live longer, more employees are staying in the workforce beyond their anticipated retirement date, a trend that demographers expect to continue until near the end of this decade.1 While some workers voluntarily choose to continue working, for many, staying in the workforce is a necessity. When surveyed, 57% of finance executives said they believed delayed retirement was primarily due to inadequate savings, forcing employees to stay on the job past their desired retirement date.2

“If it ain’t broke, don’t fix it."

"Let sleeping dogs lie.”

“Leave well enough alone.”

As an advisor, you have a responsibility to ensure that your clients’ retirement plan fees are reasonable. And every 3 to 5 years, you dutifully take your plans out to market in a live-bid environment — not an insignificant task. But five years can be a long time, during which many things can change. And while you probably remember the results of that last live-bid benchmark, your clients may not. They might find themselves searching their memories to recall what their fees were and how they compared with similar plans. They may face questions from employees that they struggle to answer, and they may find themselves wondering if you’ve been staying on top of their plan fees since that last RFP.

When the herd is on the move, the natural instinct is to think, “Maybe I should be running with them.” But it’s hard to know if they’re headed for safety or over a cliff. The coronavirus outbreak has certainly had a historic and pronounced effect on markets, and the psychology of investors, but the length and severity of the current downturn is unclear. And that uncertainty is what underlies some of the market’s dramatic gyrations. As an advisor, you may have sponsors and participants who are worried that the COVID-19 pandemic will turn into a financial panic.

Think back to your high school physics class. If you’re reading this article, you’re most likely a retirement plan advisor and not a rocket engineer, so we’re guessing that you don’t remember that class very well. If you are a rocket engineer, we apologize. Also… that’s awesome!

Whether you’re in the market for a new car, booking a hotel or benchmarking a retirement plan, price comparisons can be tricky business. Resort fees, dealer fees, convenience fees and more — it seems nearly every industry has a variety of clever pricing methods that can obscure relative value. As a consumer, this means you might occasionally pay a higher price for that oceanfront suite or new minivan. But as a fiduciary, failure to ensure that the fees plan sponsors and participants pay for their 401(k)s are reasonable can lead to costly lawsuits and hefty penalties.

Over time, small changes can have a big impact — and not always in a good way. What would be the long-term health consequences of a daily doughnut or fast food lunch habit? Probably not anything you want. Likewise, years of excessive 401(k) fees can gradually erode the financial wellness of plan participants — definitely not the outcome they want.