Death by Retirement Plan

In today’s workplace environment, offering some form of retirement benefit is as necessary as air conditioning when it comes to attracting and retaining key employees. Savvy employees are unlikely to want to work for your organization if it does not offer some form of 401(k), pension plan, 403(b), etc (small business owner’s interested in more information on retirement plans click here for basics).

So you have a Retirement Plan, Great!

Don't Forget Your Fiduciary Responsibility

As the business owner/decision maker you’ve decided that attracting and retaining key employees is important to growth and sustainability of your business.  You’ve gone out and hired a financial advisor who has advised you on the retirement plan that best suits your organizations needs.  Based on your adviser’s recommendations you’ve selected several investment options for your employees choose from.  Now your employees are happy because they have a retirement plan and your very happy because your employees are happy and love coming to work!

Unfortunately, as great a boss as you now are, you’ve just opened your business up to a HUGE exposure that is NOT covered under your general liability policy, you need Fiduciary Liability.

Fiduciary Liability

What/Who are Fiduciaries?  (Who is at risk?)

• People who have discresion over a retirement or health plan
• People who have control over plan management & assets
• People who have responsiblity in plan’s administration

What are Fiduciary Exposures? (What can a Fiduciary be sued for?)

• Benefit Selection
• Diversification of Benefits
• Prudent Acts (Acts on behalf of the plan must be made in a timely manner)
• Act within Plan Documents (Acts on behalf of the plan must be made within the scope of plan documents)
• No “prohibited transactions” (Unlawful acts or transactions made within the plan)

My Employees Are Like Family, We Don’t Need This Expense

Have you ever heard of Bernie Madoff?  Fiduciary claims have skyrocketed because of horrible things this man did to retirment plans and pension funds.  In many cases employers were unaware that they were even exposed to Madoff.  I don’t care how close a relationship with your employees you perceve to have, if they lose three quarters of their retirement savings in one week they’re going to come after someone (You!).

Please do not kid yourself, every organization that offers retirment benefits is exposed.  Whether you decide to purchase the policy or not is up to you as the Business Owner/Decision Maker.  However, the risk is real and in today’s litigous society you just never know when a lawsuit is coming.

Disclaimer:

This article is for informational purposely only. There is no legal advice being suggested or proffered and the author assumes no responsibility or liability for the actions take or not taken by the readers based upon such information.

Thank you,

Ryan H.

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