Many companies offer their employees 401(k) Retirement Plans. What these companies do not realize is that they have the fiduciaries duties of administering, and managing the Plan, following the Plan document as well as controlling the Plan assets. Other fiduciary responsibilities employers should be aware of include:


The Plan assets should be protected by a fidelity bond that covers a minimum of 10% of beginning net assets for the Plan year up to a maximum requirement of $500,000 of coverage.

Employee contributions

For Plans that have salary reductions from participant paychecks, the contributions must be deposited by the employer in a timely manner. Employee contributions should be deposited in the Plan as soon as reasonable possible to separate them from the Company’s assets.

Hiring a service provider

A fiduciary should consider the size of the Plan, fees, investment options, who will manage plan investments and how participant elections and investment directions will be handled when selecting a service provider.

Monitoring a service provider

Employers should have a formal review of the service provider every few years of the fees, performance, and participant complaints when the contract is renewed.


Some provider offer a number of services for one fee, “a bundled” service arrangement. Other providers charge separately for individual services.

Investment advice and education

Employers can educate participants on how to make investment decisions or they can hire an investment advisor to offer advice. The Plan can also have the service provider give general financial and investment education. Certain disclosures must be made to participants as part of Plan administration.

Prohibited Transactions

Prohibited transactions prevent parties in interest who may be in a position of power to exercise improper influence over the Plan. These transactions could result in loss of tax-deferred status or other penalties for the Plan. Prohibited transactions must be corrected and an excise tax must be paid on the amount of the transaction. There are certain exemptions to prohibited transactions.

If you have any questions about your Company’s fiduciary duties, or have an employee benefit plan that needs an audit, feel free to contact us at 714-569-1000 and we can assist you.

By Mendy Ayres, CPA

Maria Arriola

For over 30 years, Maria has served clients in a variety of areas including financial statement audits, reviews and compilations as well as business and individual taxation.   Maria excels working with clients in the real estate, and healthcare industries, along with employee benefit plans. You can reach Maria at 714-569-1000 Read Maria's complete bio