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Your Plan Sponsor Liability

Your Plan Sponsor Liability

| February 08, 2018
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Seven steps to manage liability when it comes to managing a retirement plan.

As a plan sponsor, you have an extensive list of judiciary responsibilities which ensure that your plan is being managed and monitored correctly. For this reason, it's important that you understand your roles and responsibilities. Your retirement plan specialist should be seen as a great resource if you need assistance educating yourself in the responsibilities of plan sponsors.

The Department of Labor also provides checklists which can be a very useful resource in understanding your rules and responsibilities.

Here are seven steps in which a plan sponsor can exercise when managing a retirement plan.

  1. Make sure that your plan is well monitored. It’s crucial that your service providers are experienced and offer management resources and state in writing their plan management responsibilities.
  2. Hire a full-time fiduciary to help manage your plan. It is important that your plan adviser is well versed in managing plan duties and that they're well bonded as well as insured.
  3. Stay active in plan management duties and meeting requirements. This will help you to take action fast and efficiently. If there is a situation in which the plan does have an issue you can act quickly to impose a game plan to self-correct.
  4. Small plans are not exempt from a lawsuit or liability. As a small plan sponsor, make sure you hire a service provider that follows and documents the process to manage your plan with complete prudence and due diligence.
  5. Don't wait to regulate. Don't wait for any changes in the marketplace to come about. Be proactive in making changes before new regulation begins. Make sure your providers are providing a service that helps you manage administrative duties, investment offerings, technology, employee education and fiduciary responsibilities.
  6. Review and understand plan fees. Terms like rebate, revenue share, administration fees, advisor fees are common when reviewing service providers plan fees. Understanding how all parties are compensated is critical. It is very important currently that plan sponsors understand how plan fees are tied to administrative, recordkeeping, technology, financial advising, education and investment services. These are all critical in making sure plan costs are fair and reasonable towards limiting liability in the plan. There is no free lunch in the Retirement Plan industry.
  7. Make sure that you're fully transparent and that all parties responsible for managing the plan are educated, are present when it comes to plan investment reviews and monitoring plan performance reviews. Make sure that they all parties are communicated and educated on a consistent basis about plan performance, plan issues, plan action and plan status.

It's best to review these areas frequently to help provide the plan with better investment options, lower fees, better service offerings from your providers and most importantly to manage liability.

Don’t ignore the law. Once the law has imposed any type of change make sure that you take action right away and document that action as you make it. Again, referencing the Department Labor website for various information and checklist is a great way to get an understanding of the items that are required by a plan fiduciary.

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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