The Employee Retirement Income Security Act (ERISA) sets standards of conduct for fiduciaries who participate in the management of a 401K Plan and its assets. Failure to fulfill fiduciary responsibility could result in personal liability for restoring any losses to the plan or any profits made through improper use of the plan’s assets resulting from their actions, even if your business is incorporated.
Are you a fiduciary? Are you meeting the requirements of ERISA?
Determination of who is a fiduciary is based on functions performed for the plan, not on a person’s title. Functions like discretion in administering and managing a plan or controlling the plan’s assets, providing investment advice for a fee, membership on an internal administrative committee or working in a human resources department that manages some or all of the plan’s day-to-day operations, or being the plan’s named fiduciary (must be at least one), make the person a fiduciary to the extent of that discretion or control.
Why does it matter if you are a fiduciary? ERISA cares because fiduciaries are acting on behalf of plan participants and beneficiaries who have entrusted their savings to them.
Fiduciary responsibilities include:
- Acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them;
- Carrying out their duties prudently;
- Following the plan documents (unless inconsistent with ERISA);
- Diversifying plan investments;
- Paying only reasonable plan expenses.
As you can see there is a lot to managing and offering a 401K Plan. Many business hire professionals and service organizations, such as Third-Party Administrators (TPA) to help meet these requirements, or rely on someone else to manage the plan. These and other actions, including fidelity bonds, can help reduce fiduciary liability but might not completely remove it.
What happens if fiduciary liability is not met? Fiduciary responsibilities involve the potential for liability. Fiduciaries who do not follow the basic standards of conduct may be personally liable to restore any losses to the plan, or to restore any profits made through improper use of the plan’s assets resulting from their actions. Business owners may believe they are shielded from personal liability by incorporating their business, but in the case of personal fiduciary liability the corporation might not shield them when they are acting for the Plan.
(Above is a simplified explanation of the law and regulations. It is not a legal interpretation of ERISA, nor is it intended to substitute for the advice of a retirement plan professional. The information is a taken from the Department of Labor “Meeting Your Fiduciary Responsibilities.”)
Unfortunately, for both business and employees, many times the complications and effort of meeting these requirements, the costs, and the potential personal liability means businesses don’t offer any retirement plan. No one wins.
How does the Value Point Associates (VPA) employer member association help? Employers who join the VPA employer member association gain access to a single shared 401K Plan, owned, managed, and administered by VPA, and offered at cost to member employers.
Let’s start with Fiduciary responsibilities:
- Acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them; and Diversifying plan investments;
- VPA offers the Plan at cost. Participant investment choices and account balance size has zero impact on profit and VPA does not get any revenue from the Fund Custodian. Participants pay less than 30 basis points for TPA and financial advisor fees. Are your employees paying more
- Apollo Wealth Management, the Plan financial advisor, created a portfolio of diverse investment choices for participants and is available to assist participants with their portfolios.
- Carrying out their duties prudently; and Following the plan documents (unless inconsistent with ERISA);
- VPA leadership combined has over 100 years of experience with retirement plans, and selected a highly qualified TPA, financial advisor, fund custodian, legal, and other professionals.
- Paying only reasonable plan expenses.
- VPA created an innovative model that brings together service providers, each with their own specialties, to deliver high quality service, leveraging the size of many employers under a single 401K Plan, to make retirement affordable for small to medium size employers. (Large employers welcome as well.) Technology streamlines administration and operation to reduce cost and improve service.
- Depending on size, employer association member annual cost with 1 to 100 employees, can range from $1,700 to $3,500 annually in total, not counting payroll service provider fees. This includes association membership, TPA employer admin, and the Plan audit fees. Are you paying more now?
Taken all together, small to medium sized employers now have access to retirement and other benefits at cost, do not have to be the Plan Administrator/Owner or manage the Plan, and can offer affordable benefits to their employees so they have the tools to make retirement a reachable goal.
Contact VPA today or call us anytime at 1-844-877-6468, ext 710. If you already have a retirement plan we can assist with the transition to VPA or assist with you getting a fresh start with VPA!
We look forward to serving you!