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401(k) Retirement Plan Fiduciaries – Protect Yourself From Personal Liability
In today’s market environment, protecting yourself from personal liability as a fiduciary of your company’s retirement plan is more important than ever. Many 401(k) providers now offer what is called a fiduciary warrantee, a fiduciary indemnification, or something similar in nature. Buyers beware, most of these so called fiduciary protection programs aren’t worth the paper they’re written on.
Read the fine print, these programs may be providing a false sense of security. They do not relieve plan fiduciaries of their responsibilities under ERISA. Most simply state that the funds offered under the 401(k) provider’s platform satisfy a broad prudence standard for long term investing. This may make you feel better, but will not protect you as a fiduciary in the event of a law suit. The plan fiduciaries (corporate officers who serve on the plan committee and who oversee the operation of the plan) retain the responsibility to prudently select and monitor the investment options that are offered to participants under the plan.
In a time when ERISA civil cases and employee litigation due to poor investment performance are on the rise, it is most prudent to work with an experienced, dependable registered investment advisor that will stand side by side with you as a plan fiduciary. You need a comprehensive due diligence process for selecting, monitoring and replacing the investment options in your retirement plan, and that process needs to be extremely well documented. At a minimum your fiduciary due diligence process should include:
- A written Investment Policy Statement [IPS] that outlines the process for you plan committee to follow. This is your blueprint and is often the first document requested in a DOL audit.
- Periodic fund reviews with well documented minutes highlighting the analysis used to measure funds against minimum standards set forth in the IPS, the deliberations of the committee regarding specific funds or asset classes that warrant attention, the actions taken and any follow up required.
- An annual evaluation and benchmarking of your service provider against competitors in the marketplace to monitor and document costs, particularly fees paid directly or indirectly by participants such as fund expense ratios and asset based wrap charges.
If you’re falling short of these minimum standards, take action now to protect yourself.
Contact:
Tim Pitney
Vice President
Sapers & Wallack, Inc.
617-225-2600
tpitney@swadvisors.com