![]() ![]() Completing any necessary plan testing and timely correcting any test failures.Meeting ERISA participant disclosure and government reporting requirements.Splitting participant accounts pursuant to a Qualified Domestic Relations Order (QDRO).Administering the participant loan program (if applicable).Paying out participant distributions, while forfeiting any non-vested portion of their account.Allocating contributions to participant accounts based on the compensation definition used by the plan.Letting employees participate based on the plan’s age and service eligibility requirements.Operating the plan in accordance with its plan document, including:.Keeping the governing plan document in compliance with applicable law.The bad news is that these responsibilities are numerous. There is good news and bad news for employers about their administration-related 401(k) fiduciary responsibilities. Meeting Administration-Related Responsibilities While the funds used by the TSP are not available to the general public, it’s possible for any employer to model their fund lineup after the TSP using commercially-available index funds.Įmployers can also outsource their investment-related 401(k) responsibilities to an ERISA 3(38) financial advisor. In fact, a simple 3-fund lineup that includes equity (stock), fixed income (bond), and capital preservation (money market or stable value) funds can do the trick.Ī simple way for employers to meet their investment-related fiduciary responsibilities is modeling their 401(k) fund lineup after the Federal government’s Thrift Savings Plan (TSP) – whose prudent investments would meet ERISA 404(c) diversification requirements. These requirements are not difficult to meet. Meeting the diversification requirements of ERISA section 404(c) is the key to offering plan participants access to a broad range of financial markets. That’s in sharp contrast to comparable actively-managed funds – whose returns and fees can differ dramatically. This uniformity makes it easy for employers to avoid underperforming funds with excessive fees that increase their fiduciary liability. This is true because comparable index funds (i.e., funds with the same market benchmark) from any of the largest providers – including Vanguard, Blackrock, Schwab, and Fidelity – offer similar returns and low fees. Picking prudent funds is easy with index funds – which are designed to track a market benchmark (e.g., the S&P 500 index). A prudent investment is simply one that meets its investment objective for a reasonable fee. They boil down to picking a fund lineup of “prudent” investments that gives plan participants access to a broad range of financial markets - so they can diversify their accounts. Meeting Investment-Related ResponsibilitiesĤ01(k) fiduciary responsibilities related to plan investments can seem particularly scary to employers, but they’re in fact the easiest to meet. More specifically, employers can meet their fiduciary responsibilities by taking action in the following six areas: 1. Following the plan documents (unless inconsistent with ERISA).Acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them.In Meeting Your Fiduciary Responsibilities, the DOL lists the general responsibilities of a 401(k) fiduciary as: The Employee Retirement Income Security Act (ERISA) states that a person is a 401(k) fiduciary "to the extent that he exercises discretionary control or authority over plan management or authority or control over management or disposition of plan assets, renders investment advice regarding plan assets for a fee, or has discretionary authority or responsibility in plan administration." While ERISA defines several 401(k) fiduciary roles, a person’s fiduciary status is based on their plan function. They just need to understand these responsibilities and how they can be met with professional assistance. In truth, it doesn’t need to be difficult for employers meet their 401(k) fiduciary responsibilities and avoid liability. Often, this sales tactic transforms employer confusion about their fiduciary responsibilities into panic about their fiduciary liability. Not helping matters are 401(k) providers that fearmonger fiduciary responsibilities to sell complicated outsourced fiduciary services that don’t effectively reduce an employer’s liability. This confusion is a big problem because employers risk personal liability when these responsibilities are not met. Unfortunately, this attention has done little to help employers understand and meet their 401(k) fiduciary responsibilities. Over the past decade, several high-profile 401(k) fee lawsuits and DOL efforts to implement a fiduciary standard for professional investment advice have put 401(k) fiduciary responsibility in the national spotlight. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |