401(k) Lawsuits: Top 10 Duties of Your Fiduciary
If you haven’t been aware of all the recent 401(k) lawsuits, your company may be one of many who will be targeted by the Department of Labor and IRS. The old saying, “knowing is half the battle” is the key to making sure that you are compliant with new DOL regulations that could leave you exposed to extreme personal liability if you are a plan sponsor, business owner, plan fiduciary, CFO or trustee.
Unfortunately, many plan sponsors make the mistake of assuming their record keeper, third party administrator and even their investment advisor has taken on fiduciary responsibility or liability only to find this couldn’t be farther from the truth. Most record keeper/TPAs or brokers/advisors would not take on the responsibility of being a 3 (38) or 3 (21) fiduciary. The bottom line is they cannot and would not want to because it’s too much liability.
A plan fiduciary has certain obligations and functions they should perform so that they are offering the best possible plan, with the lowest possible fees thereby reducing the plan sponsor’s liability exposure and the exposure of the firm.
Here are 10 tasks you should make sure anyone who is labeled your plan fiduciary is performing. This is a good starting point to guarantee your firm is compliant with new regulations, that plan participants will be satisfied and to safeguard against costly 401k lawsuits.
- Handle any and all Department of Labor Subpoenas.
- Handle any and all IRS examinations.
- Assist in any IRS or Department of Labor CPA audits.
- Identify and address any Conflicts of Interests to reach a resolution.
- Identify all Parties of Interest and Develop a Conflict of Interest Policy.
- Develop, Complete and Issue all 408 (b)2 Model Disclosure Forms.
- Complete all Annual DOL Fee Disclosure Forms.
- Provide plan sponsor with the Investment Policy Statement and update accordingly.
- Ensure all policy committee meetings are documented.
- Monitor the record keeper and third party administrator.
17,000 new agents are currently being hired by the Department of Labor to investigate prohibited transactions. If your plan’s fiduciary performs these responsibilities, then you are well on your way to separating yourself from unhappy employees and prying DOL and IRS agents. If they are not, then you need to set up steps to get them to this point. First, identify who your plan’s fiduciary is and make sure they are actually a fiduciary. It may seem like an uncanny question, but so many plan sponsors wrongly assume they have a fiduciary when in fact they don’t. Make sure to read all your existing plan documents and have the so-called fiduciary of your plan put in writing, sign and sealed, that they are a fiduciary.
For additional information, visit my article: 2 Ways Plan Sponsors Can Protect Themselves Against 401(k) Lawsuits.
About Charles Massimo
Recognized as industry expert and guest speaker at national industry conferences, Charles Massimo is a published author and media subject expert on topics ranging from wealth/asset management to investment and financial planning for high net worth families.