Who’s Your Fiduciary?
If you’re a company owner or officer, and your company offers its employees a retirement plan, there’s a good chance you are a plan fiduciary. And while there’s been much discussion of fiduciary roles and responsibilities in the investment adviser community in the past few years, the fact is that many company owners are unaware that they are a fiduciary for their company retirement plan and don’t understand the potential risks and responsibilities associated.
What’s a Fiduciary?
When it comes to a retirement plan for employees, the DOL states: “Using discretion in administering and managing a plan or controlling the plan’s assets makes that person a fiduciary to the extent of that discretion or control.”
Why is it a Big Deal?
In a word: liability. The Supreme Court has ruled that retirement plan participants can sue plan fiduciaries under ERISA to recover investment losses to their 401(k) accounts. Employees can also file lawsuits claiming that plan fiduciaries did not disclose all administrative fees deducted from participant accounts, and paid compensation to the plan recordkeeper that was more than “reasonable”.
More than 30 lawsuits have been filed against plan sponsors in the past few years, including several national class action cases. While this may not seem like a large number, it does point to the need for retirement plan fiduciaries to understand the responsibility they are assuming and for companies to structure their plans in a way that mitigates risk.
So What Should I Do?
Over the course of the next several weeks, we’ll publish a series of blogs addressing the issue of being a plan fiduciary and how to minimize risk for the company and its owners. Check back every Friday for more information
For now, check your retirement plan document to see who is named as the plan fiduciary. The tricky thing is, there are several types of fiduciaries that can be associated with a retirement plan. That’s one of the issues we’ll address.
For a complimentary risk analysis of your company’s risk exposure, contact us.