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Misbehaving Savings – Part 1 of 5

By Jack Towarnicky

Responding to Intriguing Participant Requests
Oct. 20, 1987 – I’m Too Late?

During my more than three decades in plan sponsor roles (1979-2010), I often studied workers’ savings elections and took the opportunity to frequently ask them to explain their contribution, investment, and withdrawal decisions. Here is the first of five “classic” encounters.

Three older gentlemen who were close to retirement – I’ll call them Larry, Curly, and Moe – came to my office on Tuesday, Oct. 20, 1987. They each had been invested 100 percent in the Common Stock Fund and wanted to transfer 100 percent of their account balances to the Guaranteed Fund – a fund that guaranteed principal and credited a fixed interest rate (at that time, slightly more than 10 percent). Back in those days, we valued accounts monthly (for investment transfers and contributions), so, when they inquired about their accounts, the balances had not been updated from Sept. 30, 1987. However, in one day, Monday, Oct. 19, 1987, the Dow Jones Industrial Average had dropped 508 points, a decline of 22.61 percent – the largest single day percentage loss in history!1

When I explained that their transfers would be made after the next valuation of accounts, performed on Friday, Oct. 30, 1987, they complained that I was ruining their plans for retirement. They formally appealed in writing to the plan administrative committee. I didn’t wait for the next scheduled meeting, but rather called an emergency meeting. Not surprisingly, the appeal was rejected.

I remember handing them a written, simple “no” response from the committee. At that face-to-face meeting, I also remembered to verbally confirm that the committee was a fiduciary to all participants – including others whose accounts would have been reduced/penalized if the appeal had been approved.

Obviously, I had failed in my communication responsibilities. Participants didn’t understand how deposits, transfers, withdrawals and other transactions are processed and valued. Perhaps I didn’t understand the processes all that well either. So we immediately notified all participants about the valuation process.

1 C. Romans, Remembering the worst day in Wall Street history, Money, 10/19/17, Accessed 12/27/18 at:

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