Picture this: a business owner is scrolling late at night, sipping coffee (because caffeine is life, right?), and they stumble onto a profile that seems too good to be true. “Unlimited savings, no management fees, everything handled for you!” They swipe right—but spoiler alert, folks: they just got catfished, retirement-plan-style.
Yes, even in the world of 401(k)s, not everything is as it seems. Plan sponsors can easily fall prey to sneaky impostors posing as perfectly good solutions. Today, we’re spilling the tea about three ways sponsors are getting hoodwinked into making less-than-stellar retirement plan choices.
1. Falling for a state-sponsored retirement plan instead of sponsoring their own
When states say, “Don’t worry, we’ll handle your retirement,” it sounds convenient. However, here’s the truth nobody tells you—in most cases, it’s like going to a coffee shop that only offers black coffee, when you really want (and let’s be honest, NEED), a vanilla latte with oat milk.
State-sponsored programs take a one-size-fits-all approach. Sure, they seem like the easy route at a glance, but they lack flexibility, customization, and the amazing tax benefits that come from sponsoring a plan. Employers don’t have control over investment choices and might start to wonder why their “retirement dream team” feels more like a junior varsity squad.
Sponsoring their own plan gives employers the chance to pick better investment options, create a plan tailored to their actual needs, and enjoy tax savings and employee retention benefits. Employers don’t have to settle for a state program. After all, cookie-cutter solutions are for bake sales, not retirement plans.
2. Choosing a bundled option vs. going unbundled
Ah, bundled solutions. They’re kind of like the all-you-can-eat-buffet of retirement plans. Bundled solutions claim to do it all—investment management, administration, compliance, and recordkeeping—but often, “doing it all” means doing it all just okay. When they bundle everything under one roof, you lose transparency and flexibility. And if you’ve got a problem with one aspect of the plan, you can’t exactly switch out recordkeeping services like changing a side dish.
Unbundled solutions, on the other hand, give you freedom. Want the best of the best? Hand-select each provider for recordkeeping, administration, compliance, and investments. It’s like following a Michelin-starred recipe instead of grabbing drive-thru. Sure, it takes extra thought upfront, but the end result? Chef’s kiss.
3. Not vetting 3(16) retirement plan providers
A good 3(16) fiduciary takes on a big chunk of the administrative burden of employers’ retirement plans. They’re in charge of ensuring compliance, signing/filing forms, and handling the nitty-gritty details. But some 3(16) providers don’t do nearly as much, nor do they take on any liability.
Employers need a provider who actively reviews plan documents, takes responsibility for managing tasks and compliance, and coordinates administrative duties behind the scenes. Asking the right questions before selecting a provider is key. After all, if employers wanted more work, they’d take up a second job as an alpaca farmer (hey, they’re adorable, but they’re also a lot of work).
The Bottom (Fishing) Line
Don’t get catfished by smooth-talking providers or solutions that promise the world and deliver a lukewarm reality. At EGPS, we would love to help untangle the chaos of retirement plan options. Reach out to us and find out how we can help you avoid getting catfished in today’s retirement plan ocean.
