Being a trustee of our company retirement plan reminds me of the Biblical character Job, who asked, "Where shall wisdom be found and where is the place of understanding?”
Retirement plan administration requires understanding of the continued regulatory oversight by Congress and the Department Of Labor, while consulting with a retirement plan attorney and Registered Investment Advisors provides wisdom.
When Bell and Company started in 1982, I didn’t worry about retirement. My wife Lee and I were just trying to pay the mortgage and truck payment. I remember going to the North Little Rock post office each week and there would be one client's check for the work done the previous week, and for that we were thankful.
Over time, like many businesses, ours grew and I began to think about how we would share our success with the staff that contributes to our success.
As entrepreneurs, we have choices among what happens to profit, spending, paying of taxes and reinvestment. Our firm, like many, has opted to share profits with all staff members through a generous bonus program. We offer a match of 5 percent if a staff member contributes 5 percent of his or her pay. Over time, young professionals who dedicate the maximum contribution over the course of their work life, along with the 5 percent match, will become quite wealthy. But with the generosity of a company retirement plan comes responsibility.
As trustees of this small business retirement plan our intent is generous, however regulations by acts of Congress and its enforcement arm the Department Of Labor have created regulatory burdens on our social engineering concept of creating wealth. We have recently retained a retirement plan attorney and an outside consultant who specializes in plan litigation to review our duties as trustees to ensure that we are compliant with the law. As a result of 2012 regulations, our broker is now required to advise us as to what revenue he is receiving from third parties, and we understand more about fee sharing arrangements, loads, 12b-1 fees and marketing fees, and that is a good thing. But as a result of fiduciary regulations this year, the broker advisor is increasingly unwilling to assume risk of fiduciary duty, and has shifted more responsibilities on us as trustees. That has created more expense and headache and fewer mutual fund options for us as trustees, and that is a bad thing.
We also understand the attempt to shift the burden of risk to us as fiduciaries if a regulatory agency does not agree with our broker's suggestion to our employees as to what mutual funds to buy, which may be funds offered by that particular institution to the exclusion of other funds.
All this being said, we sometimes feel that our honest intent to share wealth with our employees is being caught up (and possibly diminished) in the regulatory world of mutual funds and brokerage houses and their often hard to understand fees and costs.
If you’re a trustee of a small business retirement plan, you may want to do a review of your plan with your attorney or an independent plan advisor to ensure you're fulfilling the trustee's role in the new world of retirement plan regulation.