As the Plan Sponsor of a 401(k) Plan you may not understand that the Company (Plan Sponsor) and those named individuals with authority over the Plan have a fiduciary responsibility to the Plan. Each Plan is required to have at least one individual that is the Plan Trustee (individual with primary responsibility for the Plan) and a Plan Administrator (individual with day-to-day responsibility to administer the Plan). There may be more than one individual in these roles and a Committee may also serve in the role as Trustee, but there must be at least one individual in each of these roles. These individuals have a fiduciary responsibility to the Company 401(k) Plan and the Plan participants. The fiduciary role is defined by ERISA (the Employee Retirement Income Security Act of 1974) and requires specific actions to be taken by these individuals.
Failure to conduct the activities required can lead to fines/penalties by the Department of Labor and/or IRS or other federal regulatory agencies against the Company and the Plan Trustee/Administrator. Fines levied against individuals are not permitted to be paid or reimbursed by the Company. In addition, criminal liabilities can be applied to individuals for serious issues. This means if you are the Plan Trustee or Plan Administrator you could be required to serve jail time for not paying attention to your Plan! In addition, the Department of Labor has a “no excuses” policy which means that your lack of knowledge about ERISA or federal requirements cannot be used as an excuse for missing some of the assigned fiduciary responsibilities.
Lastly, ERISA maintains that each Plan Sponsor and the assigned fiduciaries are fully responsible to ensure the Plan remains compliant with all regulations. Most Plans use various service providers to assist with Plan and investment administration (record-keepers, payroll providers, custodian, third party administrators, and investment advisors); however, per ERISA the Plan Sponsor remains the sole party to be held responsible for all Plan activity and compliance. Monitoring the work of these providers is essential to ensure your Plan remains compliant.
We wanted to make you aware of some of these responsibilities to assist you in administering your Plan compliantly. Please review the next pages for examples of areas that should be considered as you discharge these fiduciary responsibilities.
401(k) Plan Sponsor Fiduciary Responsibility Examples and Best Practices
If you would like to discuss Summit CPA Group’s audit process in more detail contact our office at (866) 497-9761. We’re here to help you navigate the world of the 401(k) audit as proficient as possible. We also offer flat-fee pricing so there are no surprises on your bill when the job is complete.