When speaking with various Plan sponsors, I have found the vast majority of them have no idea of the significant liability they are exposed to in their duties regarding their company’s 401(k). Many Plan sponsors may have little or no prior experience or education in operating a 401(k) plan. Although it might seem like a secondary role, it is their fiduciary duty to ensure that decisions regarding retirement plans are always made in the employees' best interests. Turning a blind eye or missing a small detail may result in significant legal consequences and personal liability—potentially exposing their personal assets. Further, many Plan sponsors think that if they hired an investment advisor that they are no longer the fiduciary on their plan. However, this is not always the case. Just looking at the signature on the company's 5500 will show who is responsible for the plan. If your name is on the signature line, YOU are responsible. With the IRS continuing their focus on employer sponsored retirement plan and the lawsuits have continued to increase over the years, it is important that Plan Sponsors and owners review their current plan and make necessary changes if necessary.
What is the solution?
What can organizations do to seek a solution to the problems associated with mismanagement of fiduciary duties? Hiring an actual “Investment Fiduciary” either ERISA 3(38) or ERISA 3(21) Fiduciary offers significant opportunities for Plan sponsors and HR professionals who are playing active roles in the management of their 401k plan to manage risk. Additional opportunities to address risk can be found in the proper creation of investment committees. A properly established committee can seek to prevent these disasters and also address the risk to some of the committee members from significant personal liability.
An investment committee would be responsible for staying up-to-date on the law, industry news, responsibilities under ERISA and any other relevant information related to ERISA and other legal responsibilities. Other activities may include:
- Drafting a charter stating the purpose of committee and detailing how members are selected and what roles they play
- Establishing formal protocol for management of the plan's investment strategy
- Determining fiduciary and non-fiduciary members
- Creating an investment policy statement
Investment committee members should be well-versed in the investment strategy and plan. While working towards ensuring the plan is responsibly managed and adapted if necessary. While investment committees are not required under ERISA, they are a good risk management mechanism and enable plan sponsors to focus on the important issues that impact plan participants. Committees aim to ensure due diligence and fiduciary duties are always appropriately met and can help avoid the types of decisions that can lead to costly lawsuits.
Printers 401k offers a solution to Plan sponsors by fulfilling your fiduciary obligation.
Printers 401k collaboration of 401(k) specialists who assume specific fiduciary duties for your plan. The solution is designed to fulfill your fiduciary obligations, allowing you to continue serving as the plan sponsor without the liability and responsibility. Click Here to learn about our Fiduciary Administration Services.