401k Plan Sponsors Aboard the “USS Fiduciary”
The danger any Plan Sponsor faces.
Practically, all employers who sponsor a 401k plan are the Named Fiduciary under Section 402 of ERISA. As the Named Fiduciary you’re considered the chief decision-maker in a plan, and you have a legal duty to act solely in the best interests of plan participants and their beneficiaries. What’s the big concern about being a fiduciary? Just ask any large 401k plan sponsor and they will tell you. You are indeed the captain of this fiduciary vessel, and a good captain should go down with the ship…right?
The 401k industry services your Plan, which includes Recordkeepers, Third Party Administrators (TPA), and Investment Platforms; along with bundled 401k Providers from Insurance Companies and Mutual Fund Families. However, rarely do these 401k service providers have to come aboard your ship. In fact, their service agreements should state that they are NOT acting as a Fiduciary. You’re practically sailing alone on the USS Fiduciary.
Who is left, then, to help with this fiduciary risk?
Now, depending on the status of your 401k consultants/advisors – they may act as co-fiduciaries and get on the ship with you. They will be on the “USS Fiduciary” only if their Investment Advisory Agreement states such, and references the Section of ERISA they are operating under. Consider this as their license to come aboard.
The New DOL Fiduciary Rule goes into effect April 2017. This Rule will require that all brokers and registered reps servicing a 401k, comply with the Fiduciary Standard and/or the Best Interest Contract Exemption (BIC or BICE). The New DOL Fiduciary Rule is good for plan sponsors, 401k participants and IRA holders. However, the Financial Services Industry been fighting this Fiduciary Standard with everything they can muster. Why? The answer is that Wirehouses and Broker-Dealers don’t want to share the same litigation exposure that you have as the Named Fiduciary.
Seas, and even lakes, can get rough and dangerous, especially for the “USS Fiduciary”. As the skipper, wouldn’t you prefer to have an experienced crew on board instead of sailing alone? 401kActiveWatch embraces the Fiduciary Standard and comes with a team of experts to help you navigate through these rough 401k waters. Visit www.401kActiveWatch.com to learn about how can help you keep the “USS Fiduciary” sailing smoothly.
You don’t have to sail alone, 401kActiveWatch can help.
Many plan sponsors wrestle with the question of who is considered a fiduciary within their 401k plan. Under Section 402 of ERISA every plan must have a Named Fiduciary. This newsletter is dedicated to effectively inform our clients of current trends within the 401k marketplace.
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This article was a bulletin written by Andy Williams of the Golan & Christie law firm. In the article he expresses the fiduciary duty of the employer, and the steps plan sponsors should take to help their plan fiduciaries.