Plan sponsors sign a lot of paperwork when it comes to their 401(k) plan.<\/p>\n
Plan documents. Amendments. Recordkeeping agreements. Investment paperwork. Payroll authorizations. TPA agreements.<\/p>\n
My advice is pretty simple: don\u2019t sign something you don\u2019t understand.<\/p>\n
One area where this especially bothers me is TPA contracts. I\u2019ve reviewed agreements that seemingly absolve the TPA of almost everything while making the plan sponsor responsible for almost everything.<\/p>\n
The TPA isn\u2019t responsible for inaccurate information. They\u2019re not responsible for payroll problems. They\u2019re not responsible if the sponsor doesn\u2019t provide information on time. They\u2019re not responsible for certain errors. They\u2019re not responsible for the work of other providers.<\/p>\n
After reading some of these agreements, I sometimes wonder what they\u2019re actually responsible for.<\/p>\n
I\u2019m not suggesting that these provisions are necessarily unreasonable. A TPA can\u2019t be responsible for bad census information supplied by the employer, and every service provider needs reasonable limitations on its liability.<\/p>\n
But there is a difference between reasonable protection and a contract that essentially says the provider is responsible for nothing.<\/p>\n
The problem is that most plan sponsors don\u2019t read these agreements. They see a signature page, sign it, and move on.<\/p>\n
Then something goes wrong.<\/p>\n
That\u2019s usually when somebody finally reads the contract and discovers what they agreed to.<\/p>\n
This isn\u2019t limited to TPAs. Plan sponsors should understand agreements with recordkeepers, advisors, payroll providers, and anyone else servicing the plan. Know what they\u2019re supposed to do, what you\u2019re supposed to do, what you\u2019re paying, how the relationship can be terminated, and what happens when somebody makes a mistake.<\/p>\n
You don\u2019t need to negotiate every sentence in every agreement.<\/p>\n
You should at least understand what you\u2019re signing.<\/p>\n
A contract doesn\u2019t become unfair because you didn\u2019t read it.<\/p>\n
And your signature doesn\u2019t mean less because you didn\u2019t understand it.<\/p>\n
<\/span><\/p>","protected":false},"excerpt":{"rendered":" Plan sponsors sign a lot of paperwork when it comes to their 401(k) plan. Plan documents. Amendments. Recordkeeping agreements. Investment paperwork. Payroll authorizations. TPA agreements. My advice is pretty simple: don\u2019t sign something you don\u2019t understand. One area where this … Continue reading