401k plan management has responsibilities

A retirement plan is a highly desirable benefit for any employer to offer their employees. It’s something that’s good for improving staff retention, and something that will make it easier to recruit quality people.

However, when you’re managing a 401k plan, you have to think about not just your role as an employer, but also your 401k fiduciary duty.


Are you a 401k plan fiduciary?

People who manage 401k plans are called fiduciaries. These include the committee members, trustees, and any financial advisors that work on the plan itself.

Lawyers, actuaries, and accountants who are working purely in their own job roles are not usually considered to hold a fiduciary position. An employer making general business decisions is also not bound by the Employee Retirement Income Security Act (ERISA).

Most everyone else involved with 401k plan decision making is considered a fiduciary.


What is a fiduciary responsibility?

If you're a 401k plan fiduciary, you'd better get a handle on your responsibilities

401k plan sponsors have a fiduciary responsibility to plan participants.

Being a fiduciary means that the employer must – when managing 401k’s – ensure that the employee has all of the information they need regarding their plan. Additionally, they must ensure the government is supplied with accurate and current information on the plan.

It’s common for third party service providers to be brought in to supply information about plans. If they do this, then they need to understand what responsibilities and control they are giving to those people.

Most importantly, a 401k plan fiduciary is responsible for managing the plan for the betterment of the plan participants. 401k decisions must be made with the plan’s participants and their beneficiaries in mind. If you have their best interests at heart, you’re going a long way towards fulfilling your fiduciary responsibility.


Every plan has a named fiduciary

401k fiduciaries should engage the help of qualified plan advisors

Being a 401k fiduciary caries a great deal of legal responsibility.

401k plans must have at least one person (or entity) who is named as having control over the operation. That could be the founder of the company, or the company’s board of directors.

That named person is the person who is considered legally responsible for record keeping, financial conduct, managing investments and/or the 401k plan investment providers, and ensuring that the plan incurs only reasonable expenses.

A fiduciary should also be able to prove that they practiced due diligence, and made every effort to make prudent and reasonable decisions during the day to day management of the plan.


Pay special attention to your fiduciary duty

ERISA exists to protect plan holders from negligence and deliberate mismanagement of investment plans. It also provides a framework ensure that everything is managed correctly during the life of the 401k plan.

Employers should always take great care to fulfill their 401k fiduciary duty fairly and accurately. Most small and medium-sized business owners do not have a lot of experience in dealing with such complex financial tasks. That’s why it’s so important to talk to a qualified 401k plan advisor. They can help plan fiduciaries create and manage the structure of your company 401k plan properly.