From time to time, I have allowed students at the local beauty school to learn on a real head - mine. Invariably, I regret my decision, so much so that I am now resigned to using a professional service for future visits. Originally, I thought I could save some money for services that I always thought of as routine. Too many "bad" visits later, I have decided that hair cuts and coloring should be carried out by experienced persons who may charge more money but save me time and grief. Really, how often does one need to have a beauty disaster before the truth sets in that paying for knowledge is a good trade?
Applied to retirement plan fiduciaries, this "aha" moment begs the question as to what constitutes knowledge. Not surprisingly, the U.S. Department of Labor ("DOL") has recognized the need for fiduciary education and responded with its campaign called "Getting It Right - Know Your Fiduciary Responsibilities." According to the DOL website, this program "emphasizes the obligation of plan sponsors and other fiduciaries to:
- Understand the terms of their plans
- Select and monitor service providers carefully
- Make timely contributions to fund benefits
- Avoid prohibited transactions; and
- Make timely disclosures to workers and their beneficiaries and reports to the government."
During a presentation I made last week in Atlanta as part of the National Center for Employee Ownership ("NCEO") annual conference and entitled "ESOP Company Strategic Decision Making," I suggested that sponsors include a budget line for training. Whether that takes the form of internal training or having an outside expert develop and lead an educational curriculum for fiduciaries will depend on a few factors, including the current status of fiduciary literacy. Continued learning is important for existing fiduciaries as well, especially now with so many new rules and regulations. My co-speaker, Mr. Robert Gross - a Senior Managing Director with Prairie Capital Advisors, Inc. - concurred when the topic switched to the use of outside and corporate counsel. Regular meetings with ERISA legal professionals can be invaluable. At a minimum, a get-together can kick start a meaningful dialogue about the role of the fiduciary, decisions that must be made in a timely fashion and how to select, monitor and evaluate the work being done by individuals with fiduciary responsibilities.
Don't wait for purple hair to realize the high cost of getting a "budget" deal. Focus instead on making sure that everyone involved at the plan level has a solid understanding of what has to be done, when and by whom.