Can Executives Reduce Personal Liability Due To 401k COVID-19 Confusion?

Jun 11, 2020

Are you really up to par with the ever-changing 401k COVID policies? Keep your providers honest. Reduce sponsor liability for financial losses. Now it’s easy to “know what you don’t know” when it comes to vetting your 401k advisor and provider.

It seems like every day or two there’s some new development about the impact of COVID-19 on 401k retirement plans. It could be from legislative proposals. It could be guidance from the IRS, DOL, or PBGC, such as Notice 2020-23, which extends numerous retirement plan deadlines (even the deadline to distribute 402(g) excess deferrals). It could be from things we’ve discovered in answering subscriber and client questions.

Since COVID-19 information and policies are fluid, incomplete, confusing, and sometimes vague. Retirement plan sponsors and fiduciaries particularly have been deluged with questions dealing with the issues retirement plans face in today’s tough economy, such as: Is a layoff/furlough a separation? Can I distribute? Does it trigger a due on termination loan provision? Is this operating at an economic loss justifying a suspension of safe harbor contributions? Do we have to give a 30-day notice to suspend after SECURE? Do we credit service during the layoff if we’re paying people? Is this a hardship justifying a distribution?

Are you sure your 401k provider or adviser has the knowledge and expertise to service your plan within DOL and IRS guidelines? How would you know unless you had the updated information your providers should have?

Do you know that plans sponsors are personally liable for any errors and unwarranted financial losses to participant accounts, regardless of a co-fiduciary adviser engagement? All it takes is one disgruntled participant or ex-employee to launch a class action suit against a company and any employee involved with the implementation of the 401k plan. In times of financial crisis, these lawsuits tend to increase. After all, when times are good, few will find a reason to complain.

As trustee of, or person involved with discretionary judgment authority about, your company benefits plan you are at risk of being sued by one or all your plan participants. A recent Supreme Court ruling on February 20, 2008 (LaRue v, DeWolff Boberg & Associates, al) has made the possibility of such lawsuits against retirement plan sponsors more likely. This case has created a precedent that all fiduciaries should heed.

During periods of market volatility and plan losses the possibility of participant lawsuits may be tested even more. Retirement plan sponsors need to take the necessary steps to reduce potential – usually unintended – breaches of their fiduciary responsibilities as outlines in ERISA regulations. In fact, according to Fred Reish, managing director and partner of the Los Angeles-based law firm of Reish Luftman Reicher & Cohen and a nationally recognized expert in employee benefits law.

Although plan sponsors may think they are complying with the 404(c) conditions, most do not satisfy the 20 to 25 necessary conditions – and that could mean that committee members and other fiduciaries may be in for a rude awakening if they are faced with claims of investment losses because of imprudent participant decisions.

How can plan sponsors and fiduciaries comply with, and manage, the necessary requirements to assure that fiduciary responsibilities are being met? Until now, no benefits plan provider has been able to meet all the criteria necessary to mitigate plan sponsors’ fiduciary liability. Some of the standard features of our plans which help reduce fiduciary risk according to ERISA regulations are-

– CO-FIDUCIARY RESPONSIBILITY: We offer Discretionary Trustee Services to Reduce Fiduciary Liability

– One Bundled, Low Fees: Our plans typical reduce expenses by 15%, on average, including advisory fees, compliance testing and 5500 filings fees

– THE ONLY PLAN Available PROVIDING: Regular Due Diligence, MONTHLY review, and replacement of poor performing funds

– Advanced, Customized Plan Design: and Carve- out for Highly Compensated Employees who want to safe more for retirement than conventional plan designs may allow

– Investment Advice: One-on-one advice at no additional cost and consistently high retention and participation rates

– Electronic Filing & Web Access: Paperwork reduction and ease of access for sponsors and participants via User-friendly web site interface.

We at Saint-Laurent Associates have introduced an easy way that plan sponsors and fiduciaries can get access to the information their plan provider should have. If you know what the experts are saying then you can keep your plan sponsor honest.

Now plan sponsors can have access to weekly informational, financial trade webinar series usually limited to those in the 401k provider space. To review topics, dates and times, and register go to:

(Presentation slides and a recording of the presentation will be made available via the website portal.)

For those that don’t have the time or luxury to attend a webinar series, you can take a quick compliance review to see if your plan is within DOL and IRS compliance and my have any “red flags” deficiencies, which government auditors will use to issue you sanctions and fines click here:

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