This week I had the honor and pleasure to interview Stephen McCaffrey, Chairman of the Board of the Plan Sponsor Council of America. His refreshing answers played in brilliant contrast to last week's incessant media cavalcade of regulators and industry spokesmen. McCaffrey's comments made me think: Aren't plan sponsors the people we should be listening to? And by "we" I mean regulators, the industry and media reporters.
I can tell you, from a reporting standpoint, it's far easier to get a quote from a service provider than from one of their clients. It seems as though the users of the services we write about tend to be camera shy. And who can blame them? Unless they've been bitterly wronged (as opposed to "merely" wronged), they have no motivation to stick their necks out. So it's rare that we get the opportunity to speak to real plan sponsors.
My conversation with McCaffrey revealed several interesting nuggets. For example, do you know the PSCA lists as one of their accomplishments the successful effort in the 1950s to thwart attempts to require defined contribution plans to annuitize their payouts? Why hasn't this been a part of every story trumpeting the claim that there's a "need" to offer income stream products (read "annuities") in defined contribution plans? What's the difference between today and 60 years ago? Shouldn't that be part of the ongoing narrative?
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In terms of working with employees, McCaffrey acknowledges some of the well-known issues, but he points out they're less of a problem than might be suggested. Again, it's not because problems don't exist; it's just that they're being addressed. Granted, he's speaking for the membership of PSCA, which represents only a fraction of the nearly 1 million (according to the DOL) employee-sponsored retirement plans. But what he says is important: Prominent plan sponsors are leading the way to resolve many of the issues researchers have brought up, regulators have tried to overcome, and service providers have attempted to, in the worse cases, exploit.
For example, the area of employee education has as its challenge not so much apathy and ignorance, ("financial illiteracy" is a popular research topic), but, as McCaffrey states, competing interests. Employees must not only pay attention to their work, but their personal lives, and that takes attention away from minding their 401(k). Still, larger companies already are using gamification techniques to capture employees' attention when it comes to planning for and preparing for their eventual retirement.
Likewise, plan design can greatly assist employees as they make retirement decisions, particularly when it comes to investments. McCaffrey feels "one-portfolio" options (like target date and lifestyle funds) make it easier for employees. In addition, the use of the much written about "tiered" or "category" menu option structure helps reduce the burden of choice while still providing a sufficient number of options. This produces a more friendly 401k that employees feel more comfortable using.
Although McCaffrey likes the potential economies-of-scale solutions offered by MEP 401(k)s, he remains leery of legislative efforts to radically alter the retirement plan landscape. He's concerned attempts to fix an unbroken system may result in unintended consequences – a classic "the cure is worse than the disease" scenario. In my mind, the lack of reporting this view – in particular by the mainstream media, not the trade media – represents the greatest danger of all. Political advocates have artfully used the bully pulpit to trumpet their own agenda, not the grass-roots desires they claim to embody.
Maybe these advocates, the industry, and regulators, should do a lot less talking and a lot more listening to the people who actually operate, use, and benefit from corporate retirement plans. Come to think of it, hasn't it been the traditional role of the media to speak for those whose voices are being drowned out by the "big guys?" Maybe it's time for the big media reporters to start hoofing it and get back to those "man-on-the-street" interviews of yore. It's time to hear what the regular folks think. Who knows? We might find the retirement world is in a far better place than some would have us believe.
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Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
