man on phone looking at 4 computer screens When a company has to continue to safeguard theretirement assets of long-gone employees, at the very least that'sa cost of added time and effort that can take away from the plansponsor's stated mission. (Photo: Shutterstock)

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Does anyone remember the original purpose of an employee benefit? (Hint: What'sthe second word?)

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It used to be companies would offer prospective employeesbenefits to entice them. Benefits became just anothercomponent in the compensation equation (which includes things likesalary, vacation days, and various other perks).

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But a funny thing happened over the last few decades. In broadersociety, benefits morphed into rights and rights evolved intomandates. The same appears to have happened with company benefits(see "401k Plan Sponsors' Fiduciary Obligation to FormerEmployees," FiduciaryNews.com, October 22, 2019).

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On the face of it, encouraging more people – whether they beemployees or not – to save for retirement is a good thing. In fact,it is a good thing. No matter what vehicle they use, people shouldbe saving for retirement.

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But who should be held accountable for this? Is it theresponsibility of individuals to monitor what's happening to theirown retirement? Or should this duty fall on the shoulders of everyemployer they ever worked for?

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And so, we return to our initial question. What is the point ofan employee benefit?

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Companies, once they agree to provide the benefit, assume afiduciary obligation to make good on that benefit. That means theyhonor the annual vacation days they offer. The pay the portion ofthe health insurance premiums they promise to pay. And they act aswatch guard over employee retirement assets.

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When an employee leaves, is the former employer left on the hookto pay for those annual vacation days every year? No. The employeecashes out on the remaining vacation days he's already earned.After that, the employee is on his own.

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When an employee leaves, is the former employer left on the hookto continually pay those premiums? No. The employee can keep thatinsurance for a limited time, but only by paying the entire premiumwithout any aid from the former employer.

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Why, then, must a former company be left on the hook foreverwhen it comes to an ex-employee who leaves his retirement savingsthere?

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There's a cost to this. First, the company has a fiduciary dutyto continue to safeguard the retirement assets of long-goneemployees. There's a cost to that. At the very least, that's a costof added time and effort that can take away from the plan sponsor'sstated mission (i.e., its line of business, how it generatesrevenues to pay current employees). Anything that takes away thisfocus can harm business growth, which hurts everyone working forthe company.

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In the worst case, the plan itself bears the cost of servicingex-employees. That means current employees pay in part for thebenefits enjoyed by people who are no longer adding value to thecompany.

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Is that fair? Or is it a fair price to pay because it allowsanyone to continue to grow their retirement savings?

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If only the choice were that simple.

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And relevant.

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A better question might be: Who should watch your own retirement– you or not you?

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Much has been made in recent years about the supposed "good"occurring should employees leave their 401(k) assets with their oldemployer. This may actually be good when compared to withdrawingthe money (an option unfortunately taken in far too manycases).

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In reality, leaving assets in an old 401(k) plan may cost morethan rolling over those assets into a personal IRA (because youdon't have to pay administrative and regulatory expenses). Moreimportant, though, is the detrimental philosophy inherent inleaving your best interests behind.

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When retirement savers take control of their own destiny, theystand a better chance of achieving the kind of satisfaction thatcomes with self-confidence and self-reliance.

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In the end, doesn't that make for a better society?

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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).