Where am I at risk?

The Department of Labor standards of conduct for a fiduciary of a 401(k) plan include:

  1. Acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them;
  2. Carrying out their duties prudently;
  3. Following the plan documents (unless inconsistent with ERISA);
  4. Diversifying plan investments; and
  5. Paying only reasonable plan expenses.

When applied to investments, the phrase “acting solely in the interest of…” is often equated with the practice of selecting investments that are “suitable” to the circumstances. This mistake exposes fiduciaries to claims of violating their responsibility when they select an investment option that is suitable and reasonable under the circumstances while an equally suitable and reasonable, but less expensive alternative, is available. Fiduciaries may find that they have inadvertently violated one of their responsibilities despite their best efforts to the contrary.

What can I do to improve? 

We believe that the further one moves away from their area of expertise, the greater the likelihood they will inadvertently violate their fiduciary responsibilities. This often involves investment decisions where the complexities of the market and the growing variety of investments make it all but impossible for someone outside of the industry to know the pitfalls they face. PrinCap Retirement Services developed The PrinCap 401(k) AdvantageSM so that plan fiduciaries would be able to “outsource” much of the liability surrounding the selection and management of the plan’s investment options. PrinCap Retirement Services has the necessary experience and expertise to make informed decisions required by a well-managed 401(k) retirement plan. 

What does this mean to my officers and me?

The best answer to this question is short and sweet: It reduces your fiduciary risk. The Department of Labor regulations still require you to make an informed decision with respect to hiring and monitoring the performance of an investment manager. Once engaged, however, the 3(38) Investment Manager becomes the named investment fiduciary for the plan.