DennisBeaverJune 09, 2012 (Original publish date) • By Dennis Beaver

You are close to retirement and discover that your employer lost almost one-third of the money in the office retirement account. In a conference, he admits to having become greedy, but thought of himself at that time as an investment whiz, acting on a hot tip, believing that old saying about not putting all your eggs in one basket didn’t apply to him.

That’s exactly what happened to Cathy and Sharon, the RNs we wrote about in last week’s story. These two dedicated 30-year employees worked in small medical offices in the California’s Central Valley for doctors who were well regarded professionally.

“However, being a competent physician does not mean that you are a good investor or that you should be in charge of employee retirement money,” observes Steve Smith, vice president of marketing at Pension Services Corporation in Pasadena.

“The stories these two nurses relate are far more common than most employees realize. These doctors clearly lacked the training, common sense and discipline required to be competent investors of money entrusted to them. The medical profession is one where you often find a dangerous combination of personality traits when it comes to investing: trust and a know-it-all attitude which is rarely challenged.”

Unlike law, for example, where lawyers learn to be skeptical of everything — clients included — physicians generally trust each other’s decisions and want to believe what their patients tell them. Toss in the need to be in control, and you’ve got a recipe for financial disaster. Pension administrators see this time and time again: employers who have lost millions of dollars of retirement plan money simply because they did not even know what homework they should have done, failing to adequately follow sound investment practices, Smith notes.

Be informed: read plan documents and statements

Something else contributes in a big way to the loss of money which might have been avoided if the employees were more involved.

“There is often a shocking lack of interest in what is being done with their money — in a 401K where they contribute along with the employer, or where they do not, as with a profit sharing plan — and that is usually combined with the fear of asking questions,” Smith notes.

“Many employees do not even know what kind of a plan their office has set up or bother to review quarterly or yearly statements which reveal their vested amount and how it did over the preceding several months.

“When it comes to retirement security, none of us can rely on the assumptions we had about financial life. All kinds of benefits are being eliminated or reduced in private plans as well as Social Security and Medicare. We are going to have to pay more out of our pockets for what we thought would be there at no additional cost. These things mean a return to the days where people saved as much as they could for their later years.

“Please, never forget, we are talking about your money and when employers manage the investments, they have a legal duty to prudently do so, not taking unreasonable risks.

“Also, be aware that the Department of Labor has forced employers to restore losses caused by their failure to act properly. It’s a very good idea to spend time studying its websites to better understand your rights,” he suggests.

Always read the plan description, and review statements of the plan’s finances which federal law requires that you receive. If you cannot understand the numbers, schedule an appointment with a qualified financial advisor for help. In any event, you need to learn:

1. Where is the money sent? Morgan Stanley, Fidelity, Vanguard, etc.? This is important as you might want to do research on their reputation, financial strength and investment track record.

2. Regardless of who makes the investment decisions — you, in a self-directed 401K, or the employer in a profit-sharing plan — having retirement investments that are in one risk category only, such as high tech, is exposure to an unacceptable level of risk. This money should be at least in three different investment categories to create diversification, with different risk and return characteristics.

3. Were there large losses in the office profit-sharing plan? Politely talk with your employer and try to get information that way. But remember that your job could be at risk and you must act diplomatically, being careful to not suggest wrongdoing. As a sponsor of the plan and fiduciary, the boss has a responsibility to the employees.

Smith concluded our discussion with a warning to employers who would even dream of firing an employee who asked probing questions about retirement money:

“Federal law protects employees in these situations. You do not want the Department of Labor on your back!”


Dennis Beaver practices law in Bakersfield and enjoys hearing from his readers. Contact Dennis Beaver.



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