DOL investigator Plan sponsor flanked by independent fiduciary
Do you know the ERISA rules and 401k rules?
“When a 401k plan gets in big trouble (401k fiduciary breach), the DOL removes the company’s fiduciaries and appoints a professional, independent fiduciary. An Employee Retirement Income Security Act (ERISA) fiduciary in lay terms means someone personally responsible for the future retirement of employees, former employees and their beneficiaries. Fiduciaries typically are owners, CEOs, physicians, attorneys, CFOs and VPs of HR. In a retirement plan, they are given unfamiliar titles like “plan sponsor, plan administrator and retirement plan committee member.” “Big trouble” means that the company’s and/ or the fiduciaries’ personal assets will be used to correct their errors, restore balances and pay fines.
The following are comments from guest blogger, James Holland, Assistant Compliance Officer, MillenniuM Investment & Retirement Advisors LLC, an independent fiduciary.
Armed with Plan Fee Disclosures and Nothing to Lose
Have you Cleaned House lately? The Ticked Off Former Employee season is expected to be worst on Record…..Better get on it…You have A LOT to Lose and Much to Gain!
You get a flu shot & physical every year to protect yourself right?? Why not inoculate your Personal Assets and your firm’s 401k Plan at the same time. As the Responsible Plan Fiduciary (RPF) you are assuming a tremendous personal liability and there is a particular risk that will NOT be exposed via Fee disclosure: The Ticked Off Former Employee. The vast majority of Plan Sponsors are under the delusion that their Record keeper, Third Party Administrator, Broker or Custodian “take care of everything” for them. Very rarely if ever are any of the aforementioned Service Providers “fiduciaries.” They view the plan dramatically differently than you as the Plan Sponsor or RPF.
See for far too long many plans paid their administration charges based on size of the plan, through Revenue Sharing, an inequitable and inefficient way to handle those expenses (something we will address in another post). So the recordkeeper and broker are often getting paid more and more as employees contribute so there is NO incentive for them to remove assets or the T.O.F.E. There is actually an INCENTIVE to keep them on as their assets grow with dividends and interest the recordkeeper and broker’s compensation grows (even though they do absolutely nothing additional for the additional money). They are also NOT Fiduciaries so they are not assuming any liability for this payment arrangement.
Delegate to an ERISA Section 3(16) managing fiduciary to act as ERISA plan administrator, and delegate to an ERISA Section 402(a) Named fiduciary for plan compliance as independent fiduciary to legally manage risk
See it is not the people in the Boat who will be rocking the boat; it is the former employees you THREW OFF. Unfortunately there is no statute of limitation with ERISA prohibited transactions so that just ONE, “Ticked Off Former Employee” who has been holding the grudge for the last 5 years–now they get payback. Get them off the Plan and do it NOW. Running an ERISA Compliant Retirement Plan can be a full time job–if you do not have the time or expertise ( ERISA requires that too), get professional help from an Independent Fiduciary Team that is Qualified and Unconflicted. This Independent Fiduciary Team will take on the risk of selecting and monitor your service providers and be responsible for the administration and governance of your plan. Do you owe it to yourself (your participants and their beneficiaries) to find out if your plan needs an independent fiduciary?
All independent fiduciaries are not the same. Some independent fiduciaries believe in taking on the roles of ERISA §3 (21) fiduciary advisor and ERISA §3 (38) investment manager. MillenniuM does not. We believe that this may cause a conflict of interest. MillenniuM helps appoint and oversee a team of providers that they must constantly monitor for their “value-add” to ensure their services are “necessary” as ERISA requires. We advise you to seek independent legal counsel that is an expert in ERISA to evaluate this potential conflict. MillenniuM does not offer tax or legal advice.
James Holland and MillenniuM Investment & Retirement Advisors LLC is not affiliated with or endorsed by LPL Financial.
This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.
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