When I was working for that third party administration firm (TPA) that I always mention, I remember being asked by our conversion specialist to review a plan amendment being drafted by an outside ERISA attorney. It took quite a bit of time to determine what this ERISA attorney was trying to do with the matching provision amendment was trying to do. Rather than draft the amendment in simple language that a plan sponsor, the TPA, and their auditor could understand, the ERISA attorney took what could have been a simple amendment and turned it into the second coming of the Magna Carta. Instead of using simple language, he was using that mid 1970’s language that I call ERISAese. I told the conversion specialist that while the amendment was legal, “good luck in administering it correctly.”
When it comes to retirement plans, I believe less is more and I always say: “Keep it simple, stupid.” I am not trying to say retirement professionals are stupid, I’m just using the term to describe that retirement plans are difficult enough without trying to cloud with more legalese language that no one administering or reviewing the plan can understand. I was taught in law school to write in simple English if possible and my 12 years in the business is that not only should keep it simple if you can, but less is more.
The best TPAs, financial advisors, and ERISA attorneys are those that can take these difficult concepts in retirement plans and explain it in English. The best actuaries are those that almost any English speaking adult could understand, albeit that actuarial equivalencies and mortality tables are a language their own. As professionals in the retirement plan business, we don’t need to confuse the clients to justify our fees. Our professionalism and attention to detail in how we help administer retirement plans is enough. Retirement plan clients depend on us to get them through the difficult process of administering a retirement plan, so operating a belief to keep things as simple as possible makes their lives easier.
The same can be said about retirement plan financial advisors. Why offer 28 mutual funds in a fund lineup, when about a dozen will suffice. Large fund lineups on participant directed 401(k) plan depress participant deferral rates because participants become confused when the Plan has 5 different large cap funds and 6 different bond funds.