Small business owners, their trustees, administrators, and human resource professionals seldom have the time and resources to understand the full range of fiduciary roles, risks, and responsibilities associated with managing a 401K Plan. It’s somewhat perverse in that you are providing an important benefit to employees and in so doing you can incur additional risk (both personal and professional). Being well-informed is the best way to mitigate such risk; hence, this newsletter which is intended to be a starting point to aid your understanding.
You can think of ERISA as having layers with varied degrees of complexity. Below is a general list of fiduciary duties and responsibilities. In future letters, we’ll examine the layers in more depth. CVA isn’t ERISA counsel but we can help you gain education on key issues that relate to your Plan.
10 Key Fiduciary Roles
- A fiduciary must act solely in the best interests and for the exclusive benefit of plan participants and beneficiaries.
- A fiduciary must defray plan expenses in a reasonable manner. This implies that a fiduciary knows what all the plan expenses and costs are (your Plan should make all costs transparent and be sure that fees are benchmarked against the industry).
- A fiduciary must comply with all plan documents and all applicable federal and state laws and regulations. This implies that fiduciaries will become familiar with these documents.
- Where a fiduciary is unsure of their expertise, they have a duty to seek the advice of experts and carefully evaluate the advice given.
- A fiduciary may not engage in certain transactions with parties providing services to the plan such as the sale or leasing of property, lending of money, furnishing goods, services or facilities, or the transfer or use of plan assets.
- Self-dealing is prohibited and therefore a fiduciary cannot use their position for personal gain.
- A fiduciary may not act on behalf of any party whose interests are adverse to the interests of the plan or the plan participants.
- A fiduciary must act with the care, skill and diligence that would be exercised by a reasonably prudent person who is familiar with such matters.
- Fiduciaries have an affirmative duty to diversify plan investment options.
- A fiduciary has an obligation to prudently select investment options for the plan, as well as an obligation to periodically evaluate the performance of such vehicles to determine, based on that evaluation, whether the vehicles should continue to be available as participant investment options.
A knowledgeable adviser can help you understand your fiduciary roles, where you have risk exposure, and where can protect yourself.
Source:401K Help Center
Jerry Matecun helps business owners to understand and manage retirement plan risks and responsibilities, as well as help participants understand saving, investment, and distribution strategies vital to retirement readiness. For a no cost, confidential conversation regarding your retirement plan call or email Jerry at 949-273-4200, 616-499-2000, or jerry@compoundvalue.com.
PLEASE NOTE: Nothing herein or elsewhere on this site constitutes investment, legal, or tax advice. For details please see Disclosure.
