Working with retirement plans is a complicated, challenging, and constantly changing process. That said, there are certain constants — and things that bear repeating and/or reconsidering from time to time.
Here are a few points to ponder from my list of “constants”:
1. The key to successful retirement savings is not how you invest, but how much you save.
2. The vast majority (more than 90%) of participants defaulted in at a 6% deferral do nothing to change that default. Of those who do, about half actually increase that deferral rate.
3. Plan fiduciaries are responsible for every participant investment decision in plans that don’t comply with ERISA 404(c). Most plans don’t comply with ERISA 404(c).
4. Hiring a co-fiduciary doesn’t make you an ex-fiduciary.
5. “Because it’s the one my record keeper offers” is not a good reason to choose a target-date fund.
6. Given a chance to save via a workplace retirement plan, most people do. Without a workplace retirement plan, most people don’t.
7. Isaac Newton’s First Law: An object that is at rest will stay at rest unless an external force acts upon it. Ditto plan participants.
8. Nobody (except perhaps the lawyers who wrote them, the regulators that mandate them and, eventually, the plaintiffs’ bar) is actually reading all those participant notices.
9. You want to have an investment policy in place before you need to have an investment policy in place.
10. Disclosure isn’t the same thing as clarity.
11. “Stay the course” is only a viable strategy if you’re already on the right course.
12. If you can’t remember the last time you did a provider search, you’re probably overdue.
13. A prudent process helps you win in court; a good result keeps you out of court in the first place.
14. Despite litigation concerns, most plan sponsors still have a better chance of being struck by a meteor than being sued by a plan participant.
15. It’s not what you’re doing wrong; it’s what you’re not doing that’s wrong.
- Nevin E. Adams, JD