A Fiduciary for a 401(k) is an independent financial planner that advises corporate or individual retirement programs. These are Fiduciaries that work with a plan regularly making decisions as well as providing advice to the Plan. Therefore, if you’re the Plan Trustee or plan Administrator, then you are a named fiduciary to the Plan.
Although there is usually more than one fiduciary for every 401(k) Plan, it’s a legal requirement to have at least one named Fiduciary. If you have a larger Plan, the Fiduciaries may consist of a committee or a group of individuals. Anyone that provides oversight to the Plan is considered fiduciaries concerning the Plan.
It is a legal requirement that Plan fiduciaries act in the best interest of the Plan, Plan participants, and their beneficiaries. This is especially important when a decision may require acting in the best interest of the Plan and not in the best interest of one individual at the Plan Sponsor (a company providing the 401k Plan) or in the best interest of the company itself. In these cases, fiduciaries must always act in the best interest of the Plan.
Also, fiduciaries are required to carry out their duties prudently. Mistakes can happen but those in a fiduciary capacity must review Plan requirements on a regular basis to ensure the Plan administration is carried out in such a way as to minimize errors.
Fiduciaries are also responsible for ensuring the Plan is following all regulatory requirements and that it's following the Plan Document which governs Plan administration.
Lastly, fiduciaries need to ensure plan investments are diversified and that plan expenses are reasonable. Penalties can be imposed upon fiduciaries that do not carry out their assigned responsibilities. These penalties usually involve fines, but criminal actions can be taken in cases of fraud or severe negligence.
For more information concerning the Fiduciary role within a 401(k) Plan, we recommend you review the guidance provided by the Department of Labor.
Retirement plans can be very complex. As an innovative firm Summit CPA specializes in 401(k) audits. We have the ability to offer assistance entirely off-site with little or no distraction to your daily office routine. We also offer flat-fee pricing so there are no surprises on your bill when the job is complete. For assistance contact our office at (866) 497-9761 to schedule an appointment.