Last week I had an “a ha” moment when during a meeting, discussion turned to the meaning of the term “plan sponsor.” I always considered it a broad expression, that refers to institutional clients (e.g., pension funds, endowments, foundations). But at least one of the participants restricted its meaning to pension funds. Interestingly, a pension fund representative at the meeting shared my view!
Well, I have concluded that the term is a tad ambiguous, though the formal definition DOES seem to limit it to pension funds. I did a quick “Google search” and found two definitions:
“An employer who sets up a pension plan.”
“While some plan sponsors will take matters into their own hands and handle all the investment decisions for retirement plans, most of them outsource the fiduciary management of the assets in the plan to one or more third parties. This way, multiple investment options run by different money managers may be offered to suit various risk profiles among the company’s employees.”
It is evident that I’m not alone and even among those who know what the term is intended to mean, they often use it in a broader context, too. And so we can add this term to the growing list of words and expressions that often have multiple meanings.