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Fiduciary Oversight

Anson Analytics: Principled Position

Year after year the regulatory burden has gotten heavier for plan sponsors. Many plan sponsors are actually carrying extensive fiduciary liabilities unknowingly.

In the past five years, litigation against 401(k) plan sponsors has continued to increase. 6,925 lawsuits were filed for Employee Retirement Income Security Act (ERISA) violations in 2015 alone. Not only are large plans becoming increasingly subject to litigation, but small plans are also becoming targets. No plan sponsor seems exempt from the threat of lawsuit.

ERISA states that 401(k) trustees, such as HR Directors, CFOs, and CEOs, are responsible to:

  1. Analyze all the investments and providers for cost and performance on an ongoing basis.
  2. Have independent access to a database to benchmark mutual funds, custodians, and record keepers. These costs should be justified and reasonable.
  3. If one is not comfortable or qualified to perform this analysis, case law requires that it be outsourced to an independent expert without conflicts of interest.

“Where the trustees lack the requisite knowledge, experience, and expertise to make the necessary decision with respect to investments, their fiduciary obligations require them to hire independent professional advisers.”

DOL Reg 2550.96-1(e) and also Liss v. Smith, 991 F. Supp. 278, 297 (SDNY 1998)

In a recent survey taken of 976 plan sponsors around the country, seven out of ten firms said an adviser’s willingness to undertake fiduciary responsibilities was “important” and 38% said that having an adviser who can help with their fiduciary duty was their top concern (Fidelity).

Here is the scary part to consider: Trustees can even be subject to personal liability if they are not complying with their fiduciary duties. Therefore it might be prudent to hire an investment adviser who can help shoulder the regulatory burden. Though the trustee/plan sponsor still holds fiduciary duty over the plan, the adviser can help manage the plan while also adhering to a fiduciary role. The plan sponsor should have someone on his/her team with the experience, knowledge, and resources necessary to avoid litigation.

Are you a plan sponsor for your company’s retirement plan? Do you need someone to help advise you on what that means in terms of your responsibilities?

401(k) plans should be a benefit, not a burden. With the growing regulatory requirements and the increasing litigation concerns, perhaps it is time to consider a specialist adviser who can shoulder some of these responsibilities.


Samuel J. Sweitzer
Samuel J. Sweitzer
Founder and President of Anson Analytics, Inc. - an RIA firm specializing in Research Based Investment Management for Corporate Retirement Plans and Private Investors. Sam is a Chartered Financial Analyst (CFA) and currently serves as Anson's Chief Investment Officer. Sam resides in South Metro Atlanta with his wife and two daughters.

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