A fairly common conversation our team has with owners or key executives often begins with how busy they are with running the business, and how the retirement plan is more complex and time consuming than they expected.
To compound that issue, these individuals continue to hear media outlets discuss the perils related to administering 401(k) plans. Experiencing rapid growth — the 2014 American Business Council’s 401(k) Fast Facts states there are more than 600,000 defined contribution plans in existence — these plans are quickly becoming the main retirement vehicle for households. It is no wonder they are scrutinized more than ever before.
The first step is to educate owners and executives about the responsibilities of a retirement plan, and ultimately how to manage those responsibilities prudently and efficiently. Many times this begins by discussing fiduciary roles within the plan and clarifying what responsibilities and potential liabilities are associated with being a fiduciary.
Q #1: What is the big deal about being a “fiduciary?”
A: The history of the retirement plan fiduciary role stems from trust law but also involves ERISA (Employee Retirement Income Security Act). Being a fiduciary means that you are tasked with operating the plan in the best interest of plan participants. If you are a fiduciary, this role can carry potential personal liability and should be treated as a serious responsibility.
Q #2:Am I a fiduciary to my retirement plan?
A: This is obviously a very important question. A person is a fiduciary if one of two things occurs:
Q #3: As a fiduciary to my retirement plan, what are my responsibilities?
A: Your responsibilities depend on the role that you hold as a fiduciary. There are three core fiduciary roles within a retirement plan (described more in depth in “Peeling Back the Fiduciary Layers and Unscrambling the Fiduciary Confusion” at 401khelpcenter.com).
Q #4: As a fiduciary, how do I limit myliability?
A: Document, Delegate and Insure is the simple answer.
Being a fiduciary charged with acting prudently on behalf of all the plan participants is an important position. Understanding the answers to these common retirement plan questions is a great start.
We want to hear from you! Contact the Institutional Services Team of Sequoia Financial Advisors atretire@sequoia-financial.comfor further discussion.
The views and opinions expressed in this article do not necessarily reflect those of Cohen & Company.
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