The Department of Labor’s new fee disclosure requirements we discussed in our last post, The Employee Retirement Income Security Act (ERISA) – New Regulations for Employers, are likely to trigger questions from your employees. To help you determine how to respond to some of the most common questions they will ask, I sat down again with Kirsten Curry, President of Leading Retirement Solutions, LLC. Kirsten shared four scenarios that her experience says employers are most likely to encounter:
Scenario #1: Employees ask, “What are all of these new fees I’m paying?”
Because the fees have until now been hidden, the majority of plan participants believe they are not paying fees. According to DalBar, a leading independent financial research firm and a recent AARP survey, anywhere between 71% – 83% of plan participants (i.e., your employees) believe they pay no fees for their plan.
So be prepared! When they get their first quarterly statement that highlights all of these “new” fees, if you haven’t already addressed it, your employees are likely to be surprised and upset at what they see.
Scenario #2: Employees say, “I want out!”
Employees leaving the plan can affect overall plan pricing as it is generally based at least in part on the number of participants. In addition to cost, because lower compensated employees will be more likely to see the disadvantages of the plan when they consider the fees, your plan can become or have the appearance of favoring your higher level and more senior executive employees.
Scenario #3: Employees say, “What am I paying for?” and “Should I continue with this plan/is it worth it?”
What these employees are most likely looking for is a cost/benefit analysis. The information they want concerns how well the plan is performing. This is when it is beneficial to have a plan that offers Investment Advisor support at the plan participant level; someone who your employees can call to ask specific questions about their plan and their account. This person is a plan representative who can answer their individual questions accurately.
It is in your best interest to learn as much as you can about the plan (in comparison with other plans), the fees and the performance of it so that you can speak intelligently. You want to be able to say honestly and with confidence that you are familiar with the plan, have reviewed it, and that you stand by your decision to go with that plan.
Scenario #4: Employees ask, “Why aren’t you looking for a cheaper provider?”
You need to become familiar enough with your plan’s benefits to talk about why you made the decision to go with this plan provider in the first place. Understand it, believe it and say it with confidence.
Most importantly, Kirsten cautions that you do NOT make things up! If you don’t know the answer it is better to say that you don’t know (then find out and follow up) or direct them to the specific person who you have designated to answer questions. This can be somebody in your company and/or a plan representative.
Have you encountered any of these or other questions as a result of the buzz about the upcoming changes? What are you doing to prepare yourself and your employees?
An attorney and entrepreneur, Kirsten Curry is the founder and President of Leading Retirement Solutions (LRS), a full service company retirement plan provider. Curry founded LRS with a commitment to three core principles: transparent and un-biased services; custom open architecture retirement plan solutions; and access to traditional and non-traditional investments. Her company offers consulting services, plan design, administration, recordkeeping, government reporting, and correction and compliance services.
Curry is dedicated to supporting and promoting businesses, their owners, operators, employees and investors. She is committed to providing consultative and strategic company sponsored retirement plan services for new and seasoned business operators; designed to successfully transition clients through each business cycle, assuring business and personal objectives are achieved.