Lawyer arranging documents in retirement plan lawsuit.

Are you personally liable for your retirement plan?

Does your company retirement plan have a named fiduciary investment manager in the plan documents? If it doesn’t or if you don’t know then chances are that it’s you. Under Employee Retirement Income Security Act of 1974, the plan sponsor is the principal administrator and investment manager of the plan unless another person is explicitly named in the plan and agreed to in writing.

The investment manager is the person or entity who has discretionary control over the administration of a plan to ensure that the plan is run solely in the best interest of the participants. Everything from picking a provider and selecting investments to monitoring fees and providing adequate participant education rest on the fiduciary’s shoulders.

Now you may be thinking “I use a third-party administrator” or “We have an advisor to help give advice on the plan”. While those are both good steps to helping you run your plan, unless the third-party administrator or advisor has explicitly taken on the fiduciary role then this responsibility – and the significant liability it carries – remains with the plan sponsor.

That means that you are responsible for a prudent documented process for choosing and maintaining plan funds and assets, monitoring fees, and abiding by all the legal reporting requirements. Do you have the knowledge or training to take on these responsibilities? Do you have the time?

Fortunately, there is help available! Hiring a 3(38) investment manager can not only take on the responsibility for selecting and monitoring plan investments, but they also take on a significant portion of the liability as well. This benefits the participants in having a well-established and maintained plan along with removing much of the plan sponsor’s personal liability – not to mention giving them back their peace of mind!

The plan sponsor is still responsible for demonstrating a prudent process for selecting the 3(38) investment manager but they are relieved of the fiduciary responsibility for the plan.

By the way, even if you use a plan advisor they may not be acting as a fiduciary. A quick test would be to answer this question: Who has the final say in which funds the plan invests? If it’s you, then you are the fiduciary. Your advisor is giving you advice (which is helpful) but they have not assumed any of your liability.

If you’re worried about maintaining a documented investment process, selecting investments, or your personal liability, then it’s time to look into finding a 3(38) investment manager.

Beacon Wealth Consultants can help! We function as the 3(38) investment manager for all the retirement plans we offer featuring our LightPoint Portfolio Solutions. Schedule a call with us and we can help you better understand your current plan and whether our plans and services might be a better choice for you and your employees.