Plan Risk Profile

Fiduciary Liability

In recent months two words have been coming up again and again in our conversations with leaders in the industry: FIDUCIARY LIABILITY. Fiduciary liability is the liability that an employer faces when he/she sets up a retirement plan for their employees. ERISA section 404(c) provides significant protection from fiduciary liability. To be 404(c) compliant and absolve himself of any liability, an employer must: 1. Take the 404(c) election in both the plan document and government filings. 2.   Adhere to certain guidelines outlined in section 404(c) such as providing employee education, exercising due diligence when selecting a service provider, conduct periodic reviews of plan performance…etc.

Participant-Directed Accounts

Let’s say a company has a 401(k) where plan participants can invest their money into a handful of different mutual funds selected by the sponsor and/or service provider. As you know, these are called “participant-directed accounts”. The value of these accounts can go up or down depending on the investments selected and the performance of the overall market.

Here’s the key to this story:

If, as is the case in hundreds of thousands of plans nationwide, an employer has established a plan with participant directed accounts and has not filed a 404(c) election, that employer is responsible for any and all investment losses sustained by plan participants over the past 6 years!

404(c) is just the tip of the iceberg!

We’ve analyzed every plan filing (over 10 million) using 90 different “risk” factors. What we found is that roughly one-third of all retirement plans are either out of compliance or have significant operational flaws. A 6-year statute of limitations applies under ERISA law, making the last 6 years open for claims. “Plan Risk Profile”, analyzes 404(c) and other compliance issues facing over 860,000 private retirement plans currently existing in the U.S. The process is simple. Users enter their selected search criteria (e.g. company name, plan size, geographic location…etc.) and can instantly view a report that outlines the different risk factors facing a specific plan. Users can access the site to check their own plans, or to find prospective clients who may need help with fiduciary liability.

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