401k Lawsuits: DOL Gives Another 408(b)2 Extension-No Excuse to Procrastinate!
Last month, the Department of Labor extended the effective dates for two important rules regarding 401(k) plans subject to ERISA, the Employee Retirement Income Security Act of 1974. However, with 401(k) lawsuits on the rise, this is no time for plan sponsors and business owners to procrastinate. The effective date for the compliance deadline for the serviced provider regulations has been extended from January 1, 2012 to April 1, 2012. The date for initial compliance with the participant disclosure rules was extended to no earlier than 60 days following the effective date of the service provider regulations, that is, no earlier than May 31, 2012. The timing of the new effective dates is intended to assist plan fiduciaries and plan administrators in bringing into compliance contracts under Section 408(b)2 of ERISA before turning to compliance on participant-level disclosure, and to give more time to accomplish these tasks.
The issue of hidden fees and excessive fees is one that is gaining momentum as plan participants become more focused on their retirement plans. Plan sponsors will answer to irate employees if these sponsors do not take the initiative in ensuring reasonable fees are being paid to service providers for reasonable services.
Long gone will be the days of keeping a service provider or broker on a plan because of personal relationships, idleness or lack of awareness. Businesses can collapse under staggering litigation costs that can occur if the plan fiduciaries, who are often the business owners, do not administer the plan accordingly. As a fiduciary, you have an obligation to act solely in the interests of plan participants and beneficiaries,-not the company and not yourself-when making decisions about the plan.
You are held personally liable to the plan participants and beneficiaries for any errors, omissions or breaches in your fiduciary duty. According to a Tillinghast survey, 69% of substantive ERISA litigation in district courts is resolved in favor of plaintiffs and the occurrence of ERISA litigation is on the rise. Just because another extension has been given regarding up and coming disclosure regulations, rest assured you will be held accountable as a business owner, trustee or plan sponsor. It’s never been more important than now to be protected.
If you consider the possibility of the hiring of 17,000 new DOL agents and the need for money by our government the chance a DOL audit, or worse yet a 401k lawsuit have significantly increased, regardless of the size of your plan. Companies need to realize that it is essential they have lead time to become compliant with these new regulations before they are faced with fines, fees, legal action and outraged employees.
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.