You likely recognize the importance of seeing your doctor for an annual physical to keep your health in tip-top shape, or taking your car in for routine maintenance to keep it running like new.
But what about checking the health of your retirement plan? When is the last time you reviewed your retirement committee charter, investment policy statement (IPS), and other key retirement plan documents to ensure you’re in compliance with fiduciary standards?
Ideally, you should meet with your plan’s advisor at least once a year to evaluate the overall health of your retirement plan, which includes reviewing plan documents and operations to help ensure they are up to date with current guidance and regulations.
As a retirement plan sponsor, you are a fiduciary to the plan. And as a plan fiduciary, adhering to plan documents is one of your most important roles. This means you have an ongoing and continuous responsibility to monitor:
It’s your job to ensure they are being managed in the sole interest of your participants and their beneficiaries, and for the exclusive purpose of providing benefits and paying plan expenses. Not following these standards of conduct could subject you to personal liabilities. In addition, courts could take action against plan fiduciaries who breach their responsibilities. There has already been a plethora of lawsuits against plan fiduciaries in recent years.
In 2015, associate Supreme Court Justice, Stephen J. Breyer, famously submitted his verdict of the landmark Tibble v. Edison case, which set a precedent for fiduciary breach cases regarding the monitoring and selection of retirement plan investments. He stated that “… a trustee has a continuing duty — separate and apart from the duty to exercise prudence in selecting investments at the outset — to monitor, and remove imprudent, trust investments.” In short, monitoring and managing your retirement plan, its investments, and operations are not responsibilities to be taken lightly.
Moreover, government and regulatory agencies such as the Department of Labor are continually monitoring plan fiduciaries to make sure they are following plan documents and procedures in accordance with the Employee Retirement Income Security Act (ERISA), the law that governs employer-sponsored retirement plans. Ultimately, this puts the onus of compliance and proper plan management on you. That said, it can be helpful to partner with your plan advisor to perform annual plan reviews for any common mistakes while managing your retirement plan and investments.
Here are tips to avoid six of the most common mistakes:
If you identify operational or compliance errors during your annual review — don’t panic. The Internal Revenue Service (IRS) and Department of Labor (DOL) have programs to assist you in fixing mistakes. Your plan’s advisor and third-party administrator (TPA) can help with operational and compliance errors, too.
Keep in mind that once you’ve identified and corrected any plan errors, put processes in place to avoid future mistakes. In addition to conducting annual reviews, perform regular maintenance to ensure your plan remains in good health — just like sticking to a healthy diet and exercise regimen prevent illness.
This article is for educational purposes only. The tax and legal references attached herein are designed to provide accurate and authoritative information with regard to the subject matter covered and are provided with the understanding that LoVasco Consulting Group is not engaged in rendering tax or legal services. If tax or legal advice is required, you should consult your accountant or attorney. LoVasco Consulting Group does not replace those advisors.
Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a registered broker dealer and Investment Advisor, member FINRA / SIPC. LoVasco Consulting Group is independently owned and operated.
Return to Insights Page
LoVasco Consulting Group and their agents are presently licensed to sell traditional life insurance in Michigan as a resident producer and numerous other states as a nonresident producer. This site is not intended as an offer to sell securities, which may be done only after proper delivery of a prospectus and a client suitability review. Proper state registration is mandatory prior to conducting business in any state. Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a registered broker dealer and Investment Advisor, member FINRA / SIPC. Check the background of this Firm and/or investment professional on FINRA's BrokerCheck. LoVasco Consulting Group is owned and operated independently from M Holdings Securities, Inc. LoVasco Consulting Group is a member of M Financial Group. Please click here for further details regarding this relationship.