What Is Your Fiduciary Responsibility for Your Employees’ Retirement Plan?

Offering your employees a 401(k) plan can help them achieve a comfortable retirement. However, business owners must follow retirement plan regulations to protect themselves against future liability. Understanding your role as a fiduciary is critical.

First, what is a fiduciary? The IRS defines a fiduciary as “a person who owes a duty of care and trust to another and must act primarily for the benefit of the other in a particular activity.”

A retirement plan fiduciary is responsible for looking out for the employees’ best interest as it pertains to their retirement savings within the plan. The IRS guidelines for retirement plans identify five key duties for fiduciaries:

1. Loyalty — The plan trustee who oversees the money must act solely in the best interest of the employees.
2. Documentation — The plan documentation must be written to comply with all IRS requirements.
3. Prudence — Actions within the plan must be made with care, prudence, skill, and diligence. If the employer cannot carry out these responsibilities, they must hire someone with the appropriate skillset.
4. Diversification — A plan fiduciary must assess investment options to determine if they will further the purpose of the plan, balancing the risk of loss with the potential for gain.
5. Reasonable plan expenses — A fiduciary’s oversight of the plan must include frequent review of the plan, the services provided, and the associated costs.

Understanding and monitoring the fiduciary responsibilities within your company retirement plan is critically important to your employee’s financial health and helps protect the business from liability. For more information on employee benefit plans in Iowa, contact Brian McKibban at brian.mckibban@CLAconnect.com or 515-346-3631.

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, investment, or tax advice or opinion provided by CliftonLarsonAllen LLP (CliftonLarsonAllen) to the reader. For more information, visit CLAconnect.com. CLA exists to create opportunities for our clients, our people, and our communities through our industry-focused wealth advisory, outsourcing, audit, tax, and consulting services. Investment advisory services are offered through    CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor.