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Jan 27, 2010
“Obama-Save” (as opposed to Obama-Care)
On Monday, January 25, 2010, the White House released a fact sheet on their Middle-Class Task Force initiatives. The fact sheet has few details, but there is a great summary of the retirement-related initiatives here on PlanSponsor.com. I have a number of thoughts and concerns about these initiatives that I’ll outline below.
Let me just say up front: commission-based investment advisors and insurance product sellers (and maybe Mr. Biden’s Middle Class Taskforce) will NOT like my viewpoint … but that’s too bad! My company is about helping Plan Sponsors and their Participants do the right thing, the right way … period. Figure out how to line up with that philosophy and we won’t have a problem.
The shift in the benefits industry over the last several decades from pension plans to 401(k) plans and traditional indemnity medical plans to consumer-driven health plans has ushered in an era of “personal responsibility”. In “the old days” employers took responsibility for all of the decision making around benefits for their employees. The traditional pension plan said to the employee: “We’re handling it. Your pension will provide your retirement income, so you don’t have to worry about it. We’re making all the decisions for you and taking all of the risk.” The 401(k) plan, on the other hand, tells the employee (whether they understand it or not): “We’ll give you the vehicle, but you have to make all the decisions and take all the risks. If done right, it will provide for your retirement income; but success depends on the quality of the decisions YOU make. We’re not responsible for those decisions anymore.”
This has been a good shift for employers, resulting in less liability and less responsibility for the outcomes. But too often, I don’t think the employees “got the memo” about their personal responsibility. It’s like raising a child, and when they reach working age, we dump them into the world without the skills needed to succeed. You wouldn’t hire a chemical operator at a chemical plant with no experience, and just point them toward the reactor and say “there it is, now go run it.” You hire experience, or … you train them! You provide training internally on key internal processes that help your business succeed.
In the same way, if we want our employees to be responsible for their own retirement savings, we need to provide appropriate training for our employees to succeed at saving for retirement. This training should go way beyond just handing them an enrollment kit, a pile of fund prospectuses, and instructions for logging onto the plan’s website. But sadly that is often the extent of “training” provided to employees. If we truly want our employees to be responsible for their own retirement savings choices, and we want them to be successful at it, we will need to provide not only information about the plan itself, but also some training on what it all means and what it will take to reach their goals.
