As a 401(k) Fiduciary, If it Sounds too Good to Be True...

August 19, 2016

 

Thank you Blaine Aikin of fi360 for sharing your wisdom and perspective on several current and important fiduciary issues for employers on this episode of the podcast.  If you haven't had a chance to listen yet, the link is below.  

 

Now, for this edition of the 401(k) Fridays Fiduciary Fact and Folly!

 

For those of you who have listened to prior episodes of the podcast, you might recall that one thing I like to do is define terms.  So, let’s define what having “personal liability” as a fiduciary means.  Blaine and I hit on it a few different times in our conversation, but it never hurts to revisit the source, Section 409 of ERISA.  It reads:

 

Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter shall be personally liable to make good to such plan any losses to the plan resulting from each such breach, and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary, and shall be subject to such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary. 

 

As we have seen in enforcement actions, fiduciaries who commit a breach resulting in losses to a plan or participants can be subject to the forfeiture of their own retirement accounts, liens on their personal property, and garnishments on their wages.  For todays fiduciary fact, there is material and personal financial risk when you become a retirement plan fiduciary.   

 

Listeners to prior episodes of the podcast also know that I don’t mention this in an effort to elicit fear, I do this to raise awareness, dispel misinformation and partial truths you might have heard in the past.  This also ties into my broader mission with the podcast,  as a plan fiduciary, when you are better informed you tend to make better decisions based on the specific circumstances of your employer, plan and employees that will ultimately serve the best interest of your participants and afford you more fiduciary protection. 

 

As nice as it would be to excuse yourself from all fiduciary liability, unfortunately that is not possible.  We spent a lot of time talking about different fiduciary safe harbors that are available, ways you can enlist the support of others to share in fiduciary responsibility and steps you can take to add protection through a strong process, even with all of that, you cannot get rid of your fiduciary responsibility.  As 401(k) or ERISA class action lawsuits continue to make headline news (well, at least in the employee benefits world!), inevitably you will start to hear “pitches” from organizations who will want to help you “outsource” or even hand-off your fiduciary responsibility to either their organization or another group.  While some of the core services could be of value, and they might share in some fiduciary responsibility, remember that as a plan fiduciary, you can not completely step away from your fiduciary responsibility and thus liability.  If it sounds to good to be true, it is likely folly to believe it is.  

 

If you would like some more personal support to provide training to your plan fiduciaries or an evaluation of ways to add additional layers of fiduciary protection to your plan, send an email to info@401kfridays.com.  Who knows, we might be able to help!

Want more information or updates?  Then join our growing community of subscribers!

 

 

 

 

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