Be Wary Of Providers Bearing 401(k) Fiduciary Guarantees

Twice today I was asked by a TPA and a major mutual fund company/TPA about my view concerning some of the bundled providers touting fiduciary guarantees or fiduciary roles that they are serving.  Using the term fiduciary can be very misleading because it may give the idea that if the plan sponsors utilizes the services that these bundled providers will assume fiduciary responsibility for the plan sponsor’s plans when all they really is making some sort of money back guarantee gimmick that they may indemnify you if you adhere to their programs and their fund lineups.

The word fiduciary being thrown around is useless and misleading unless the plan sponsor knows that the level of fiduciary role is co-fiduciary, ERISA 3(38), ERISA 3(21), or none of the above. The way fiduciary being thrown around reminds me of Kosher foods. Kosher foods adhere to Jewish dietary laws and are under rabbinical supervision. While most non-observant Jews don’t think twice about who supervises the food’s Kashruth, observant Jews do. Observant Jews wants to know the Rabbis behind the rabbinical supervision and whether their supervision can be trusted. It is irony that most observant Jews won’t eat Hebrew National hot dogs even though they answer to a “higher authority.”

While most plan sponsors won’t think twice into looking into what exactly the fiduciary roles that a bundled provider is touting, a more vigilant plan sponsor will. I think it is extremely important for plan sponsors not to trust any fiduciary marketing gimmick that any provider or investment advisors throws out there and actually determine what fiduciary services they are getting for their money. If not, they may be in for a shock when they get sued by an angry participant.

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