Here’s 5 Things You Need To Know To Create A Bulletproof 401(K) For Your Company
Are you responsible for your company’s 401K plan? A study of 401K Plan Sponsors conducted by Fidelity Investments shows 38% are actively looking to make a change. A recent uptick in employees taking their employers to court caused Plan Sponsors to look closer at their plan design and seek a second opinion. Here are some reasons 401K Plan Sponsors are on the wrong end of the 401K litigation stick:
Not Playing By The Fiduciary Rules
In general terms, a Fiduciary is a person who owes a duty of care and trust to another and must act in their best interest. As a 401K Plan Sponsor, you are acting in a Fiduciary capacity. If a company does not have an HR specialist and the Plan Sponsor wears many hats, the risks are high things may fall through the cracks. Studies show most plans with less than $10,000,000 in assets and less than 50 employees are handled by the business owner. If this describes your situation, a review of your plan documents and administration procedures is a prudent thing to do. Even if you outsource some management of the plan, you retain fiduciary responsibility. The good news is plans can be designed to minimize your exposure.
Click here for an article by the IRS that provides details of a Fiduciary’s Responsibilities. Here is a summary of what you need to know about being a Fiduciary:
- acting solely in the interest of the participants and their beneficiaries;
- acting for the exclusive purpose of providing benefits to workers participating in the plan and their beneficiaries, and defraying reasonable expenses of the plan;
- carrying out duties with the care, skill, prudence and diligence of a prudent person familiar with the matters;
- following the plan documents; and
- diversifying plan investments.