Mark Twain never said not to put all your eggs in one basket. In fact, he said the opposite. In advising against “scattering your money and your attention,” the famed wordsmith penned “Put all your eggs in the one basket and – watch that basket!”
It’s the duty of the 401(k) plan sponsor to watch over the best interests of all the good eggs employed by the company. It’s not just a duty. It’s a fiduciary duty. And that’s a duty unfamiliar to many first-time plan sponsors.
With all the education arranged by plan sponsors on behalf of plan participants, who arranges for the fiduciary education of the plan sponsors? Do they know enough of what they don’t know to even seek this education? Or do they simply seek to inform themselves of the more popular topics while they ignore the most important ones?
Like elementary schoolers, 401(k) plan sponsors need to immerse themselves in fundamentals first (see “5 Critical Topics to Teach 401k Plan Sponsors: Fiduciary Education Curriculum (Part I),” FiduciaryNews.com, April 30, 2019).
If you try to run before you learn to walk, chances are greater you’ll fall. The same is true with the fiduciary education of plan sponsors. It may be thrilling to explore the vast jungles of investments and investing, but that’s but a small corner of one’s fiduciary fiefdom. More important, the ABCs of dotting i’s and crossing t’s, though comparatively less exciting, can spell the difference between an unlucky break and a fiduciary breach.
Here’s the problem. Most plan sponsors occupy the C-suite. They’re “too busy” to take even 30 minutes out of their day for a quick lesson in “fiduciary.” In other words, fiduciary education isn’t high on their priority list (“We’ve got a firm to run, don’tcha know!”). In other, other words,
Plan sponsors need to accept the fact they possess no innate expertise in the nature and scope of ERISA fiduciary duties. They may possess an innate expertise in their business, but corporate retirement plans aren’t their business. Plan sponsors must be taught. They must actively participate in their own fiduciary education.
It’s been said the road to rehabilitation begins with the realization you have a problem, or at least a deficiency.
Decades ago, through the roaring nineties, it was clear 401(k) plan sponsors weren’t as sensitive to their fiduciary liability as they might have been. The decade’s doldrum at the outset of the new millennium exposed their fiduciary underbelly, and a series of high-profile court cases confirmed that liability wasn’t theoretical. It was real. This heightened their notion of their own fiduciary liability.
In the past few years, however, as tort attorneys have finished picking the low hanging fruit of easy cases and plan sponsors built more effective protections, we may see the dawn of a new era of plan sponsor complacency.
This is disheartening.
And it wouldn’t be an issue if only plan sponsors remain committed to taking periodic booster shots of fiduciary education.