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As a business owner, you probably do your best to provide your employees with quality benefits, including a 401(k) retirement plan to help them save for their golden years. So why would offering this benefit expose you and your business to the risk of a lawsuit? After all, you are probably contributing to your own 401(k) account under the same plan.
Here’s the problem: The sponsor of your 401(k) plan has a legal responsibility to select the best plan possible for employees as a fiduciary under the Employee Retirement Income Security Act (Erisa). For many small businesses, the owner is the plan sponsor. How much do you know about your current plan? Chances are, not enough.
Recent class actions have purported that some 401(k) plans may include hidden fees that have the ability to undermine the potential growth of retirement savings accounts. Unfortunately, many small business 401(k) plans may make it hard to see the impact that implicit fees have on retirement savings. Administrative and management fees for mutual funds included in plans may often be difficult to decipher.
So what can you do? Here are two quick suggestions:
1. Ask your 401(k) plan administrator to disclose all the fees included in your plan. If the total fee level exceeds 2 percent of the assets under management, your plan may warrant a closer look.
2. Check with your personal financial adviser for help in understanding the types of funds included in your plan. If your fund choices earn a failing grade, perhaps he or she can recommend a better 401(k) plan provider.
Be proactive about assessing your current plan. Then you can make an informed decision either to keep it or to invest in a better, more appropriate plan for you and your employees. This effort just might reduce your risk of a future 401(k) lawsuit. Remember, your plan is being offered as a benefit—make sure it is truly beneficial to all.
Vice-President for Solutions Development
Loring Ward Group
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