8/21/12 2:10 PM – 401k Liability Issues for Sponsoring Companies

Some of you may not realize that a significant part of my practice is advising companies on their 401k plans. The lack of 401k knowledge I see on the part of their brokers/advisors in the small plan space, that is, below $10 million in assets is really shocking.

If you are an officer or owner of a company providing (sponsoring) a 401k plan you really need to listen up. You need an investment policy statement that outlines how the plan investments are to be run and monitored, including suitable benchmarks and written critieria for selecting and removing investment choices, also for properly appointing and monitoring an investment advisor. Yet, on many plans I find that none of these are in place and the advisor or insurance agent is doing really nothing except collecting a fat paycheck and playing golf with an owner. The broker or agent often does not even have a service agreement agreeing to provide essential duties.

You have a business to run. Yet, as a plan fiduciary you are liable for meeting certain obligations in properly running the 401k. You cannot afford to just assume that your administrator, your HR person or the advisor is doing this for you. In most cases, they are not and as a fiduciary you are on the hook. You may be setting yourself up for trouble in the case of a Department of Labor audit or worse yet, a lawsuit by a disgrunted former plan participant.

If this is the case you really need to call me to look at your 401k plan. Don’t call your broker because he usually has no clue about these issues. Or better yet, call the advisor and then call me and look at the difference. Even if you have had an audit from a CPA, that is usually focused on different issues like making sure contributions are being properly credited and balances match. A general practice CPA rarely has expertise in the fiduciary responsibilities associated with a 401k plan.

I charge nothing to meet with you initially and could save you many thousands of dollars and big headaches for a little of your time. You need not be in my home state of North Carolina. You can reach me at 704-698-1040.

Leave a Reply

Your email address will not be published. Required fields are marked *