Retirement Plan Sponsors’ 401(k) Perceptions vs. Reality

Fiduciary Trust Building
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Your company sponsored retirement plan is a benefit to your employees. This benefit is seen by your employees as second only to health insurance. Your responsibility in this matter is huge and can be outsourced.

Most plan sponsors don’t feel the urgency of fulfilling their fiduciary responsibility to their defined contribution plans. There are three main reasons these business owners stick with their current plans, even if the plan has flaws that cost their employees. However, these reasons rest on mistaken assumptions.

1. Unaware of fiduciary status. These plan sponsors say, “What’s a fiduciary? Who? Me?” Sometimes the fiduciaries’ identities should be obvious because they’re named in plan documents. Sometimes, identifying fiduciaries requires familiarity with the term’s definition. You are a fiduciary if you exercise control over the plan, provide advice to the plan or its participants, or select or supervise other plan fiduciaries. This broad definition embraces many employees at the plan sponsor who may never have heard the word “fiduciary.”

2. Believe theyve offloaded their responsibilities. Some brokers and service providers parade under the misleading title of “co-fiduciary.” They may say, “We recommend these great funds,” giving the impression that they’re fiduciaries, even when they’re not. However, in reality, the company sponsoring the retirement plan (generally identified in the plan documents as the “named fiduciary”)—not the co-fiduciaries—still bears full responsibility and liability when it works with a co-fiduciary. A plan sponsor can delegate fiduciary responsibility, but only to a fully qualified fiduciary.

3. Too busy to bother. Sometimes plan sponsors say, “This demands extra, time-consuming work. It won’t grow my company. Why should I bother?” This attitude is reinforced by the failure of many companies to comply with their fiduciary responsibility. However, this is an increasingly risky path. Lawsuits and employee complaints are likely to rise in 2012 as the Department of Labor requires greater disclosure of plans’ effectiveness for employees in terms of costs and investment returns.

The Good News: An Independent, Fee-Only Financial Advisor Can Help

An independent financial advisor who’s knowledgeable about fiduciary issues can shift much of the burden―in both time and legal liability―from the plan sponsor.

Remember by offering retirement plan that will help employees and yourself successfully retire you will attract and retain talented employees.

Please comment or call to discuss how you can reduce your risk and workload. In many case for lower cost.

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