The Rosenbaum Law Firm P.C. Blog

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The times that I have had trouble with a contractor or other type of business provider is when I didn’t bother to check their reviews.

Of course had I known the waterproofing company that I used for my downstairs a few years before Hurricane Sandy had 28 complaints with the County Department of Consumer Affairs, I wouldn’t have been so surprised how bad their services was.  I probably could have avoided having hired them, dealing with the issues when their French drain wasn’t working probably, and going through the whole trouble of filing a claim through the County.

If I hire a bad contractor for my home or a bad accountant or bad attorney, it’s my cross to bear. Plan sponsors don’t have it that easy. If they choose a plan provider, they will be on the hook for liability because they are a plan fiduciary, which means they have a higher duty of care, than if they were just hiring a provider for themselves.

Plan sponsor need to properly vett their potential plan providers and that means a little more than taking the plan providers’ word for it that they are good.

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My wife will admit I am a dutiful husband. For years, I have been forced from sleep to stand online for Black Friday sales. One year, I stood on line at Sports Authority for the 5 am open to buy a treadmill. A treadmill is great exercise equipment as long as it’s being used. Thanks to where it was sitting in our den, it was used primarily to hold clothing and everything else, but used for its intended purpose. The treadmill died during Hurricane Sandy. So I ended up buying an elliptical machine, which is rarely used as well. The point is that when you go through the trouble of having something that’s good for you, it doesn’t mean anything if you don’t use it.

Many plan providers are a little flashy when it comes to the services they offer. They may give you a large binder that details everything the plan sponsor should do as fiduciary. Some may develop investment policy statements (IPS) for their client that reads like a treatise or develop an education policy statement that will lay the plans on how plan participants will be educated for participant direction of plan investments.  The problem is that these things are useless if it’s not being used. Quite honestly, having these apparatuses and not using them is worse than not having them all.

For an example, an IPS is not legally required even though Department of Labor agents do ask plan sponsors if they have them. What is worse: not having one or having one that’s not being used? I would suggest that any bells and whistles that a plan provider offers are far worse than not having those bells and whistles.

So a plan provider that offers something that the competition isn’t offering should make sure the plan sponsors are actually using those bells and whistles.