Considerations for Plan Committees

Many Universities were recently sued due to how they handled their recordkeeping relationships on their plans. While much of the cases mirrored what we have witnessed in the for-profit space, there were some modern twists as it related to data.

Many are now familiar with how technology companies monetize the “free” stuff that we have come accustomed to. So if you Google “ceiling fan”, it’s possible and quite likely that the next time you are on their search engine or a social media site, you just might get hit with a slew of ads for ceiling fans. While this may be annoying, it doesn’t effect your ability to retire (unless you buy a ridiculous amount of fans).

But what if your retirement plan recordkeeper is data mining your employee participants to cross sell investment management, annuities, life insurance, mortgages, banking products, etc? Is this ethical? Does it open up the retirement committee to liability?

One prominent attorney who specializes in the retirement plan space has commented on his considerations for retirement plan committees (Fred Reish from Drinker Biddle) and they are:

  1. Review your recordkeeping agreement to see what it says, if anything, about the use of participant data,
  2. Invite a representative of the recordkeeper to a committee meeting to explain how they use data to provide non-plan sales or marketing to participants,
  3. If they use data, determine which of the services provide value to participants and whether appropriate safeguards are in place,
  4. Determine if the recordkeeper considers use of the data in determining the price of recordkeeping,
  5. Document the process and decisions.

Like most committee tasks, the documentation of the process is extremely important and a good advisor can guide you through the process. #401k #403b #QPRetirement