Business Owners & Executives’ Individual Fiduciary Liability on 401(k) (& Other) Plans

July 9, 2021 | Lessons in Business Growth Brian M. Thompson, C(k)P, CPFA, Focus OneSource, RockWay Wealth Partners,

Did you know as an owner or signer/decision-maker on a 401(k) (and most Retirement Plans) that Fiduciary Liability extends to individuals responsible for the plan? You can face individual consequences for not adhering to DOL & IRS regulations? Yes!

Depending on your role with a Retirement Plan, you may not be able to avoid all liability, but you can decrease it with this combination of tactics:

Outsourcing – Not all Fiduciary responsibilities can be outsourced, like sponsoring the plan (usually a Board or Owners) or overseeing the service providers to the plan. But two main areas can be outsourced to decrease

Fiduciary liability: 1. Administration 2. Investment Management.

• Many companies will sign on to the Retirement Plan as a Fiduciary in each of these two areas, respectively. As a potential side bonus, you or your employees are freed up from these responsibilities to focus on your core business!

Systems & Processes – Although the Business or Non-Profit are responsible for the following items, your Plan’s Advisor/Consultant can do or coordinate these services or support you to get them accomplished.

This is not a complete list, but highlights some key items:

  • Documenting of:
    • Meetings, Reviews, decision-making processes with notes/ minutes (internal and with plan service providers).
    • Employee communications- ALL types related to the Plan.
    • Review & benchmark the services you are being provided for value and cost, and the investments’ performance and cost.
    • Secure storage of current Plan Documents, Disclosures, Notices.

Insurance – Organizations can purchase Fiduciary Insurance to help cover the entity and individuals.

If you have any questions about these or other retirement plan questions, please contact Focus OneSource.