Does your Company sponsor a 401K plan? If the answer is yes, then you may not be aware of all the responsibilities ERISA requires from plan fiduciaries. ERISA defines a fiduciary as someone with discretionary authority or responsibility in plan administration.
For example, did you know that the most basic fiduciary responsibility is notifying payroll and human resource department personnel that they are plan fiduciaries? Or that fiduciaries must establish a formal mechanism for selecting and reviewing the investment options under the plan, which includes monitoring fees charged by mutual fund companies?
I bet you didn’t know ERISA requires that plan fiduciaries document their selection process when selecting service providers for the plan. Service providers include investment consultants, plan actuaries, and others who assist in plan administration.
These are just a few responsibilities that plan fiduciaries face daily when administering 401(k) plans.
What can you do to make sure you’re covered?
Well, for starters, reviewing the overall governance of your retirement plan to determine exactly who has fiduciary responsibility will help with reducing the risks of sponsoring and operating a retirement plan.
Also, it is important to keep these other factors in mind:
- If your company has a board of directors, steps should be taken to limit the board members’ liability.
- Purchasing fiduciary insurance to protect those exercising discretion on behalf of the plan.
- Establishing charters that clearly delineate the responsibilities of plan fiduciaries and
- Conducting annual training with fiduciaries and non-fiduciaries that assist with plan operations.
A prudent and efficient governance structure is key to the successful operation of a retirement plan and the company that sponsors the retirement plan. Plan Sponsors, fiduciaries and non-fiduciaries may obtain assistance with their governance structure from other persons such as attorneys, consultants, financial professionals, accountants, and record keepers.
For more information, call LSL CPAs and Business Advisors at 714.672-0022
Click here for more details about our ERISA Plan Audit services.
By Mike Rossi, CPA
