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Three Easy Ways to Reduce Your 401(k) Fiduciary Risk

03/10/2010:

When you start and run a 401(k) for your business, you take on a fiduciary role to maintain your plan and manage your program in line with the laws and regulations. There are eight core duties that help ensure you run the plan in your employees’ best interest and keep your plan safe and performing well for your company. In the worse case, a fiduciary could be personally liable for breaches of duty that resulted in loss of plan assets or possibly a lawsuit.

With the support of a good provider and some straightforward knowledge, there are some easy ways to reduce your risk as a fiduciary. Strong provider support can also make it easier for employees to manage their account with the right information, which is good for everyone.

So, without further adieu, the three ways to lower your fiduciary risk are:

  1. Run your plan in line with ERISA 404(c) rules. This offers you limited liability relief for losses an employee could experience with their investments based on their own decisions and direction. We make it easy for all our customers to be 404(c) compliant. Download our 404(c) checklist to get a real good sense for best practices and how we work to make it simple.
  2. Select a Qualified Default Investment Alternative (QDIA) for employees that don’t take active control of their investing in your program. The employee may have money in their account from an employer profit share, match, IRA rollover, or auto-enrollment situation and simply never logged on to direct how he or she wants to invest these monies. Putting the money in a stable fund or money market does not meet the requirement and have been a common practice. We ensure all new ShareBuilder plans are automatically covered with QDIA.
  3. Use a registered investment advisor (RIA) to select and monitor investment options as a co-fiduciary. With an investment co-fiduciary, the advisor will share in any issues that may arise from the investments offered in your plan. Many small businesses do not have an investment committee. It’s one reason ShareBuilder 401k serves as your RIA and automatically delivers you the backing of our 7-person Investment Committee. The committee regularly monitors your investment line-up and adjusts model portfolios in line with the Investment Policy. Not many providers will offer you this safeguard.

Yes, this topic may have seemed a bit intimidating at first, but as you can see with the right knowledge and support, you can run a great program with minimal hassle or risk.

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