Offering a retirement plan can be one of the most challenging, yet rewarding, decisions an employer can make. However, the vast majority of employers are dangerously unaware of their responsibilities and the liability associated with serving as their company’s 401(k) plan sponsor. Many company executives believe incorrectly that their 401(k) service provider, the broker, is the plan sponsor and that all associated responsibilities reside with them. Nothing could be further from the truth.
What Is a Fiduciary?
The term “Fiduciary” is exclusive to the financial services individual. A fiduciary is generally defined as an individual or entity that holds themselves to be an expert, by education and experience, in a particular field of study or specialty. A fiduciary is obligated under the law to serve the best interest of their clients (beneficiaries) and avoid conflicts of interest. In the event of a conflict of interest they are obligated to disclose it in writing. No one is held to a higher standard of care under the law than a fiduciary. In some instances, a fiduciary may need and is often required to engage an expert in the areas of investment selection and management as is the case with a company executive who is appointed the fiduciary of the company’s 401(k) plan. The executive would hire an experienced and qualified investment advisor to oversee the specific selection and management of the plan’s investment options. In fact, ERISA Section 402(c)(3) expressly authorizes named fiduciaries such as the plan sponsor to appoint investment manager(s) known as independent fiduciaries.
Retirement plan fiduciaries have important responsibilities and are subject to standards of conduct because they act on behalf of participants in a retirement plan and their beneficiaries. These responsibilities include:
- Acting solely in the interest of plan participants and with the exclusive purpose of providing benefits to them;
- Carrying out their duties prudently;
- Following the plan documents;
- Diversifying plan investments; and
- Paying only reasonable plan expenses.
While these duties seem pretty straightforward, there are certain instances where a plan sponsor is unaware that their action or inaction puts them at risk to liability from either plan participants or governmental agencies such as the Department of Labor (DOL) and the Internal Revenue Service (IRS). For plan trustees, that liability may be personal liability.
As a 401(k) plan sponsor, get the FACTS about your responsibilities.
RKG Financial – Taking Responsibility for Your 401(k) Plan
The RKG 401(k) Plan Service is a program that:
- Provides expert, conflict-free advice to plan sponsors and their participants,
- Access to some of the top performing mutual funds and Exchange Traded Funds (ETF)
- Proprietary investment models
- Complete fee transparency and
- Total plan costs that are much lower than many of the programs offered by the large financial services providers.
When you engage with RKG Financial, our 401(k) plan service provides plan sponsors with:
- Fee-based, independent Registered Investment Advisors who serve as an Employee Retirement Income Securities Act (ERISA) 3(38) named fiduciary investment manager, taking responsibility and liability for investment selection and performance monitoring and alleviating the plan sponsor of this responsibility;
- Full transparency for all plan costs because we have no hidden fees or fee-sharing arrangements between providers;
- Independent, unconflicted, one-on-one advice to plan participants;
- Access to institutional investment vehicles that are not available on retail 401(k) platforms and normally require a minimum investment of $2 million per fund;
- Advisor Managed Portfolios that give participants the ability to turn the management of their 401(k) assets over to an expert advisor;
- A comprehensive fund menu that is created by an independent advisor using a Proprietary Fund Screening Process;
- Independent providers who are free from the conflicts of interest that plague traditional 401(k) plans;
- A plan manager who monitors the investment options and models and makes any changes the investment manager deems necessary;
- Overview and documentation, at least annually, regarding the selection of the investment options offered to plan participants and management of the models so that plan sponsor may fulfill its fiduciary responsibility (and therefore its legal liability) regarding the sponsor’s engagement of the manager and continued engagement of the manager.
If you are a Plan Sponsor with 401(k) plan assets between $1 million and $75 million, contact RKG Financial to discuss a complimentary 401k Plan Diagnostic Review. Call (508) 480.8383 or via email using the form below: