Strong employee communication and support systems are critical if most of the workforce consists of employees who lack sophistication in dealing with the market or who don’t speak English. “The investments don’t matter and the returns don’t matter if the people aren’t participating,” says David Huntley, principal of HR Investment Consultants.
Gondolfo agrees. She recalls with dismay what her assessment of Mount Kisco’s plan revealed: “When I got there, 30 percent of people’s retirement assets were in cash in the biggest bull market,” she says. “In this climate, where people can sue you over a retirement plan performance, you have an obligation as an employer to monitor not only financial performance, but also a vendor’s ability to communicate with plan participants in an effective way so that they have an understanding of the account and what’s in it.”
Since Gondolfo took over, monitoring of different aspects of the plan has been refined. “I have a pension committee that oversees the choices and the lineup of investments,” she says. “The accounting arm oversees individual calculations and accounts to validate them, not just send us the file for 2000. My accounting staff still goes through that to make sure there are no errors.” Internal controls are a priority, she says. The company also has an external auditor that does random sampling as a backup. “I don’t think that you can have too much auditing,” says Gondolfo. “That’s from my experience of walking into something that was a mess.” Needless to say, it won’t become a mess again, as long as every aspect is being monitored appropriately.
Meg Glinska is a freelance writer based in Boston.
Tips for Smarter Shopping
Plan fees and expenses merit scrutiny.
1. Have you decided which fees and expenses you, as plan sponsor, are going to pay, and which will be charged to plan participants?
2. Do you know which services are covered under the base fee and which incur an extra charge?
3. Do you know which fees and expenses are charged directly to the plan and which are deducted from investment returns?
4. Do you know that some investment options have higher fees than others?
5. Does your service contract with your vendor spell out any restrictions, such as charges for early termination with the provider?
6. Do you know what information you will receive on a regular basis from your service provider so that you can monitor the provision of services and the investments you’ve selected, and make changes?
7. DO YOU KNOW how the fees you and your plan participants are paying compare with the marketplace?