To help Plan Sponsors meet their responsibilities, employers need to understand some basic rules, specifically the Employee Retirement Income Security Act (ERISA). ERISA sets standards of conduct for those who manage an employee benefit plan and its assets (called fiduciaries).
Here are some of the things we can do with MVP(k)Plan℠ to assist Plan Sponsors with meeting their fiduciary obligations.
- A written plan that describes the benefit structure and guides day-to-day operations
- A trust fund to hold the plan’s assets
- A recordkeeping system to track the flow of monies going to and from the retirement plan; and
- Documents to provide plan information to employees participating in the plan and to the government.
These days Plan Sponsors are very aware of the term Fiduciary when it comes to the company’s 401(k) Plan. All decisions made by a Fiduciary must be in the best interest of “others” regardless of how those decisions may impact the Fiduciary.
Although Plan Sponsors cannot completely eliminate their fiduciary liability, we can help Plan Sponsors meet their fiduciary obligations by putting in several “safe harbors” of fiduciary protections. Here is what we do and what we recommend:
Four primary fiduciary duties under ERISA 404(a)(1)
|(A) Exclusive Purpose Rule – a fiduciary shall discharge his/her duties with respect to a plan solely in the interest of the participants and beneficiaries; and they must know and defray all reasonable expenses of administering the plan.||MVP(k)Plan℠ is designed to be a low-cost easy solution for plan sponsors who want the best retirement plan for their employees without the complicated day to day administration and confusing reports. It’s easy to know that your Plan is being maintained solely in the interest of your employees when the reports are simple to understand and you are provided with complete fee transparency.|
|(A) Prudent Man Rule – a fiduciary must act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity would act.||
MVP(k)Plan℠ has a solution for plan sponsor to outsource some of their liability under ERISA §404(a) (e.g., “Delegation of investment decisions to a prudent expert”).
|(A) Diversification Rule – a fiduciary must diversify investments in order to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so.||MVP(k)Plan℠ will provide an Investment Policy Statement (IPS) template designed to guide the selection of the plan's investment options in accordance with the “broad range of investment alternatives” requirements to receive the available “Safe Harbor” protection under ERISA §404(c).|
|(A) Plan Document Rule – a fiduciary must act in accordance with the Plan documents but only to the extent that the Plan is consistent with ERISA requirements.||MVP(k)Plan℠ is a structured plan with structured processes to help the Plan Sponsor with the plan’s operation and compliance. The processes were designed to ensure that the Plan is being operated properly in accordance with ERISA requirements. We help take the guess work of the|
|(A) Purchase Fiduciary Liability Insurance||This is different than the fidelity bonding requirement by ERISA which does not protect against legal judgments. Fiduciary liability insurance may be purchased to protect against legal judgments, with the limits and exclusions available in the market, but obviously, it is better for plan sponsors to avoid being drawn into lawsuits in the first place than to rely on insurance coverage.|