One of the keys to a successful business is to offer a competitive wage and employee benefits package to help with hiring new employees and rewarding the present staff. Many companies offer employees a retirement plan as part of that package.

Companies that sponsor a 401(k), Profit Sharing or Pension Plan need to be aware of their fiduciary responsibility in managing that benefit program. A Fiduciary is some person (company owner) or some entity entrusted to manage the retirement plan to the best of their abilities and to work in the best interest of ALL plan participants.

The DOL has recently implemented new Fiduciary rules governing financial professionals that sell and service qualified retirement plans. This is a very positive step towards fee clarity and impartial/professional conduct.

Unfortunately, many employers have the impression that with these new rules, all the burden of fiduciary responsibility has been reassigned to the financial consultant. That is not the case and you still are a fiduciary.

There are 3 levels of fiduciary services available to help meet plan sponsors obligations. The first is a 3(16) fiduciary which is a plan administrator that takes responsibility for daily plan functions; however, it is the plan sponsors obligation to monitor these individuals (becoming a fiduciary themselves). The second is a 3(21) fiduciary which is a “co-fiduciary”. It does take some responsibility by selecting funds for the employer, however the plan sponsor must approve the funds (becoming a fiduciary themselves) The third is a 3(28) fiduciary that has total control in selecting and approving funds; however, it is the plan sponsor’s responsibility to monitor that adviser (becoming a fiduciary themselves). By virtue of a company sponsoring a plan and selecting those vendors to service your plan, YOU STILL ARE A FIDUCIARY. Along with fulfilling your responsibilities as a plan sponsor it may also be in your best interest to insure this risk as part of your insurance program.

So what should an employer do to meet their fiduciary obligation? First, have a process for plan decisions that cover plan design, vendor selection, and employee communications. Secondly, meet with professionals to help establish the correct policies and procedures. (Legal consultation, third party administrators, insurance professionals and compliance consultants)

It is imperative to first understand your obligation as a fiduciary and secondly, have a plan to protect yourself and your company from possible litigation. Offering employees a good benefit package is a great way to retain talent but there are always risks that need to be addressed to mitigate any potential problems in the future.

 RANDY BENDER OF LIBERTY INSURANCE AGENCY, PITTSBURGH, PA.