The Unintended Result of your Good Will

You set up your company’s retirement plan to help build your business.  Perhaps it was to prepare for your own retirement or maybe to keep a key employee; in either case you may now be the unwitting owner of some unexpected and potentially large liabilities.

The Employee Retirement Income Security Act of 1979 (ERISA) establishes who is responsible for how a plan is managed as well as their duties.  These are called a plan's fiduciaries.  A fiduciary is anyone who exercises any discretionary authority or control in the management or administration of a retirement plan or its assets, including anyone providing investment advice for compensation or a fee.  Generally a plan has three fiduciaries: the plan's trustee, the plan sponsor (the employer, you) and the plan administrator.  In addition persons who assume certain portions of those roles may be considered as well.

ERISA also establishes what makes a retirement plan compliant. Clearly if you are the one that set up the retirement plan and it is not compliant, you can see who will bear the full weight of the government audits and penalties.  So, as the employer, it is your job to make sure your retirement plan is compliant.  This protects your employees and yourself, the employer, as well.  Many employers believe that just setting up a retirement plan with an outside provider removes their liability.  But that is not the case.  Poor communications between the employer, trustees, and administrators can lead to employees not being properly served and that results in increased liability.

Here is a simple checklist to evaluate your plan administration.  Answer these questions from both the perspective of the employer and the employees.

Does your company:

• Provide reasonable opportunity to communicate investment instructions?

• Permit invest instructions on at least a quarterly basis?

• Offer sufficient investment choices?

• Provide plan information?

• Provide sufficient investment information?

• Offer general financial and investment information?

• Provide asset allocation models?

• Provide interactive investment materials?

• Automatically provide the  necessary plan information to participants?

• Know what information must be available upon participant request?

If you cannot answer the above questions with authority, you should further research your responsibilities.  We have a brochure available upon request which can help you further evaluate your situation and providers.  Please contact a HR Leger, Inc. Account Representative for a free copy.