No decision comes without some kind of risk. An employer simply offering a 401(k), Defined Benefit, or other qualified plan to his/her employees invites responsibilities that if not met (or if abused) could be potentially damaging to the company and the business owner can be held personally liable. These fiduciary responsibilities are wide ranging and require an engaged approach.

www.dol.gov/ebsa/pdf/fiduciaryresponsibility.pdf

Violations of fiduciary responsibilities may be small, like depositing employees 401(k) deferrals late, or large, as reflected in the recent Supreme Court ruling against Cigna Corp.

Here, Cigna Corp (the Plan Administrator) did not properly inform its employees of changes to the pension plan. According to the article by Ellen Shultz, employees were wrongly led to believe that their future benefits were more valuable than they actually were.

The key point here is Cigna Corp mislead their employees regardless of the fact that it may have been intentional or purely accidental. The Court ruled that it happened and the action was unlawful. Intent is irrelevant.

The lesson for employers: understand what defines a fiduciary and who might be one in your organization; know what your legal responsibilities are as a fiduciary; monitor the performance of hired third party service providers (accountants, investment brokers, Third Party Administrators, etc.) to ensure you are are meeting your fiduciary responsibilities for the plan.

Keeping informed will keep you out of the court room.

– About Benefit Consulting Group –

Benefit Consulting Group (BCG) is a Third Party Administrator that specializes in the design, set up and annual administration of qualified retirement plans (401(k), Profit Sharing, Defined Benefit, etc.). BCG does not manage cash, securities, or other financial products. BCG does not specifically endorse the fiduciary advice directly or indirectly offered in linked articles. All conclusions of cited articles are those of the original author(s) and BCG does not specifically or non-specifically endorse these conclusions. Rather the goal of the BCG Blog is to educate readers interested in qualified plans and related subjects. In no way should any postings or linked articles be interpreted as financial advice. Readers of this blog assume personal responsibility for investments made as an individual or on behalf of others.

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