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Member of a board? Fiduciary for your firm's 401(k) plan?
You’re likely a fiduciary. How can you protect yourself?
A recent article by Leah Singleton in Directors & Boards highlights a key topic of which many Board members are unaware – they are likely fiduciaries for the company’s 401(k) or pension plans. ERISA defines both who is a fiduciary as well as the duties of a fiduciary. The key elements are that you must act for the exclusive benefit of providing plan benefits, as a “prudent man”, utilizing “prudent diversification”, adhere to the plan document, and not engage in any prohibited transactions.
Acting as a fiduciary is common sense. What’s the worry?
You may think the duties described above are simple. What’s the worry? But, the reality is lines can get blurred. As an example, when comparing 401(k) record-keepers or platforms, you have to balance websites, architecture, fund selections, costs, etc. with no clear guidelines on how to weight each factor.
Is there a way to get fiduciary protection?
Yes, we always recommend that plan fiduciaries carry the proper fiduciary liability insurance (full disclosure – we don’t sell such products nor do we receive any compensation for such). The key issue is that fiduciary liability is individual and not at the corporate level.
So, if you’re on a Board or if you’re an executive involved in the administration of an ERISA-sponsored plan, you will want to consider having your company purchase fiduciary coverage on your behalf to ensure that you’re protected.
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