Corporate Trustees: Lead The Charge To Improve Retirement Plans

Have these shifts been harmful? Arguably, no. But the result in many cases has been “The Law of Unintended Consequences.” The pendulum may have swung too far.

Certainly, the concept of a discretionary trustee retirement planning program was hard to sell during the investment boom of the last 10 years. Who needed one when, as we quickly learned, an untrained monkey could pick stocks that outperformed the market merely by throwing a few darts? Any Plan Sponsor was considered capable of selecting options for the company retirement plan using a designated mutual fund list.

Moreover, it was thought that, given enough “educational materials,” any “Jane or Joe Lunch Pail Participant” could become wealthy beyond their wildest dreams. So, then, why not let the employer fund employee retirement plans using employer securities? Truly loyal employees could demonstrate their fealty by investing 100% of their individual contributions in additional company stock.

Even those of us who specialized in fiduciary laws, personal investing, and retirement planning who may have thought this was misguided were confident in the protection afforded us as directed trustees. After all, we were only doing what made the customer happy.

Certainly, times appear to have changed! A movement is underway to permit and provide investment and retirement planning advice on a large scale. Recent legislative changes and possible future laws permitting enhanced retirement and investment advice for plan participants will, hopefully, bring welcomed relief to a dazed and confused employee work force, reeling from significant damage done to their retirement nest eggs and to their net worth.

However, the issue is whether the coming changes inure to the exclusive benefit of plan participants and their beneficiaries. Are more laws the solution? Or must change come from the professional community established to provide this function all along–the corporate discretionary trustee? (See sidebar for suggestions that would put them on the right path.)

In conclusion, shouldnt the professional corporate trustee be leading the charge for change instead of sitting on the sidelines, serving as little more than a conduit for soft dollars and little risk? (When I last checked, the general powers afforded a trustee seemed rather extensive, owing to the expertise associated with the title and function.)

Obviously, there are no assurances in life; and, the Enron debacles and others like them shall pass. But for the many Jane and Joe Lunch Pails, an able professional trustee can make a significant difference. Plan sponsors owe it to all employees to retain able and competent independent trustees to guard against these types of fiascoes in the future.

, JD, is senior vice president-business development for the MemberBank program of PlanMember Services Financial Corporation, Carpinteria, Calif. His e-mail is [email protected].

Reproduced from National Underwriter Life & Health/Financial Services Edition, August 12, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.