Addressing Participant Concerns

Art by Linda Liu

Participants do lodge complaints against their retirement plans from time to time, and all of these should be addressed, experts say.

If a retirement plan sponsor ignores a participant complaint, that participant is liable to turn to the Department of Labor (DOL) on his own or hire a lawyer who will do so on his behalf, says Blaine Aikin, executive chairman of Fi360.

“More than 60% of the audits that result from participant complaints result in action, which could include civil or criminal penalties and/or direct the sponsor to pay the participant’s attorney fees,” he says. “So, the sponsor could end up facing not just private class action lawsuits but lawsuits by the DOL as well. The plaintiffs are becoming more successful and sophisticated. Their attorneys are becoming quite skilled at drilling down on what resonates with the courts.”

Common complaints include a lack of access to education or resources about the plan, says Josh Sailar, an investment adviser with Miracle Mile Advisors. “Such complaints have merit,” he says. “Participants should always be able to have questions about their plan answered, be that through online resources or the ability to reach out to a person.”

Another complaint participants often voice is that they have no access to their funds, should the plan not permit loans or hardship withdrawals, says Tom Conlon, head of client relations at Betterment for Business.

Kevin Haskell, a partner with Aegis Retirement Partners, agrees, citing that as his firm’s most common complaint. “Due to IRS and plan rules, many employees are unable to take a distribution while they are still employed,” he says. “Many plans also don’t offer a loan provision, or, if they do, some plan sponsors restrict loans to only one or two outstanding at a time or restrict the availability to only hardship withdrawals.”

Another frequent complaint of participants, Conlon says: “There are also some participants who are hyper-concerned about fees. If you have a lot of participants complaining about fees, you might find yourself litigating with them—it’s very common for participants to sue fiduciaries over fees.”
He stresses having a process to determine whether fees are reasonable. With this in place, “you have less to be concerned about,” he says. “If you don’t have the necessary tools to do this rigorous analysis, hire an ERISA [Employee Retirement Income Security Act] 3(38) fiduciary to provide assurance you are acting in the best interest of participants.”

The best way to avoid questions or complaints about fees is to be fully transparent, Haskell says. “We spend considerable time educating our plan sponsors and plan participants on how fees are applied,” he says. “Once participants are fully aware of all the rules and fees associated with their retirement plans, they tend to participate at higher contribution levels.”

DWC – The 401(k) Experts, of St. Paul, Minnesota, responds to questions about fees in person, says Keith Clark, managing partner.