In the movie “Back to School”, Rodney Dangerfield doesn’t understand why his son is buying used books because they have already been read. His son says because they have already been already underlined. Rodney’s character said the person who could have underlined it might have been a maniac, so he implores his son to buy new books.
When I was working for a third party administration (TPA) firm, our plan administrators never read the plan documents. Using a Chris Rock line, I joked that if you wanted to hide something from a plan administrator, you should put it in a plan document file folder because they never would open that. Seriously, plan administration was done according to a spec sheet that was placed on to the Relius recordkeeping system. The problem is that the head of administration who drafted the spec sheet was not a maniac, just incompetent. I remember having a new client go ballistic because the administrator stated that the plan allowed for multiple loans even though I limited it to one on the plan’s new loan policy. Well Norma had multiple loans down on the system. She was incompetent and tried to pin the error on me even though the loan policy was drafted correctly.
This allergy to reading plan documents wasn’t just at my old firm. Years later, I was working with a nurses union which had split off from a much larger union and kept their plan at Vanguard, like the union that they split off from. My client had to leave Vanguard because they were just too small. As part of the transition to the new TPA, I had to get discrimination testing results from Vanguard. Vanguard said there weren’t any because the plan was a safe harbor 401(k), as per what the computer system stated. The problem was the plan was never a safe harbor plan, the union that they split off was. Instead of making good on correcting this error, Vanguard said they would do nothing because my client never paid for discrimination testing in the first place. They pawned us off to another TPA to perform discrimination tests for the 3 previous years, which my client luckily passed.
From my experience with good TPA firms, they actually do read the plan documents and actually question when they don’t see provisions that are supposed to be there. They used to always tell you that you lose something when you read Cliff Notes and not the actual books you were assigned to read in high school. Well administrators do lose out when they rely on spec sheets drafted by a superior because that superior may be a maniac and/or incompetent.