Many plan sponsors take their fiduciary responsibilities far too lightly. Many believe their service provider is taking care of this for them. This is a mistake because most service providers will do anything not to act as fiduciary to your plan. Be ceratin everyone involved understands their roles and responsibilities. Get this in writing.
According to the Department of Labor, “Fiduciaries have important responsibilities and are subject to standards of conduct because they act on behalf of participants in a retirement planand their beneficiaries.”The DOL is enforcing a 1974 law called the Employee Retirement Income Security Act, which has been updated through the years. For the average retirement plan investor, the result of the ERISA standards is that plan fiduciaries have some level of legal liability for your retirement plan. That doesn’t mean you can successfully sue them if your investments don’t perform exactly as you’d wished. Rather, you can monitor them to ensure they’re doing everything the DOL says they should.
There are three basic categories of retirement plan fiduciaries. Here is a simplified breakdown of the definitions:
1) There are named fiduciaries whose job title is specifically mentioned in plan documents as a fiduciary role. These often include plan trustees, company officers, and plan administrators.
2) There are named fiduciaries whose role is implicitly associated with the functions of the plan, even though it isn’t specifically spelled out in plan documents.
3) There are unnamed fiduciaries who assume a fiduciary role by providing advice or affecting the investment choices available in a plan. With this proposed definition, many people become unnamed fiduciaries and begin to assume some level of liability for the advice they provide to plan sponsors and/or plan participants.
Employers who sponsor a qualified retirement plan for their employees are fiduciaries to the plan. This fiduciary responsibility is critical to the successful retirement of themselves and their employees. Please do not take this responsibility lightly.
Please comment or call to discuss how you can minimize your fiduciary responsiblities.
- Borzi vows to keep IRAs in Labor’s revamped fiduciary proposal (401kplanadvisors.com)
- Reducing Fiduciary Risk (401kplanadvisors.com)
- Why Should 401k Plan Sponsors Care What Others Think About the Fiduciary Standard? (401kplanadvisors.com)