Fine tune your Company Sponsored Retirement Plan….before the DOL Fines you!

Jul 18, 2016Blog

So, you own your own company, or you run a company, and are responsible for the well-being of the employees. You have decided that it makes sense to have a company sponsored Qualified Retirement Plan. After all, you want to attract and keep good employees. You even go so far as offering a company match, it’s good for you and your employees. Looks like a win-win all the way around. Let’s say you decide to set up a 401k. That’s a good type of plan, right? I mean, many different types of companies have this type of retirement plan, right? Yes, they do! (1)
Now, it’s 2012. After having the plan for a few years, and receiving all sorts of praise from your employees, you decide it might be time to meet with the advisors about the plan again to make sure that you are up to date on everything that you have to do to be a good Plan Sponsor. You go to your “retirement plan folder” that you keep in the file cabinet labeled “Human Resources”. You pick up one of the pamphlets that the Financial Advisor has left over the past few years and you start reading up on the current events surrounding retirement plans – “riveting” stuff to digest on a Friday afternoon. After about two or three pages you come upon an article about the Department of Labor (the DOL), and the article goes on to talk about how they are increasing their “investigation” into company sponsored qualified retirement plans.(2) What is this all about? The notification talks about plan sponsors being “fiduciaries” and being liable if the plan is not being administered in accordance to the plan document. The notification talks about “fines”, and that over 70% of the time the DOL finds something wrong with the plan.(3) Now this gets your attention, but being a Friday afternoon you cannot reach your Financial Advisor, so you leave a message for him/her to have them call you on Monday.
Monday comes and you reach your F.A. and they set your mind at ease that your plan is running just fine, but nonetheless, they will come and sit down with you and make sure they review everything that you have going on.
Upon meeting with your F.A. you find out that the DOL is concerned about a few things. They want to make sure that when you withhold money from your employee’s paycheck, that the money is deposited into their 401k account as quickly as is humanly possible. They also want to make sure that you have an appropriate Qualified Default Investment Alternatives. They want to make sure that if you have an IPS (investment policy statement) that you are following it, and that should just about do it. Your invest professionals assure you that you are o.k., and they go on their merry way. (4)
Now, it’s 2016 and you’re wondering if everything is still going well with your plan. Over the last few years you have tried to stay up with as much as you can, but you DO have to run your business. and You just don’t have all the time that is required, which is why you hired an advisor in the first place. But, you jump back into the folder that holds the Notifications that your F.A.s have been leaving and start to read up on what’s new in the Retirement Plan Industry. After reading one, two, three, and then four different articles regarding Fiduciary Duties and Responsibilities surrounding Plan Sponsors (you, the employer), you realize that a WHOLE lot has been going on in this industry in the past few years. You first read about three different areas that have to be addressed and monitored.(5) Within those three areas are bullet-point lists that number 10-20 in length, of areas that you are responsible for:
 “investment committee”,
 “Asset Allocation Models”,
 “Administration and Report”,
 “Selecting and Monitoring”,
 ” Criteria for Selecting and Monitoring”,
 “who is responsible for deciding who monitors this or that”,
 “Service Providers and are they bringing value”,
 “what are the needs of the participants”,
 “are the participants satisfied or even using the services that are being paid for”,
 “who is writing the checks to the service providers, the plan or the participants”
 …and it goes on and on and on. (5)
You realize that it is time to meet with your financial advisors again.
Upon meeting with the financial advisors, you realize that their tone has changed. They don’t seem as confident as they did a few years ago. There seems to be quite a bit of information that they are not clear on, and as such, you are less clear on the entire ordeal, and you are left with no direction as to what liability you are taking on, or more appropriately, what liabilities have ALWAYS BEEN THERE that you never knew about.
You ask the advisors if they are the Fiduciary or if you are the Fiduciary to the plan. After all, you did hire them, didn’t you? Doesn’t that relieve you of your liability in the running of the plan? They are getting paid for managing your plan, are they not? Again, the answer is not clear as to what the advisors are doing to make this plan less of a headache, and what they are not. Many CFO’s that have discretion in running their company’s DC plan (401k) don’t believe that they are a plan fiduciary because they are not named, which is not true. Because they have a plan advisor, companies think they are adequately protected but over 60% of DC plans (401k) use an advisor not qualified or experienced enough to help companies and their committees effectively limit their liability. (6)
How did this happen? How did this wonderful “employee inspiring”, “employee retaining”, “retirement savings vehicle”, that was supposed to be so wonderful, become such a monster? Did I mention the DOL? The DOL dramatically increased their number of auditors in 2013 which resulted in almost $700 million in fines in 2015, a $100 million increase over the previous year. And if you haven’t noticed, there’s a rash of lawsuits against 401(k) plans. (6)
Sometimes it is difficult to ascertain how we get from here to there in life. Suffice it to say, Qualified Retirement Plans are THERE so to speak. And if you are a plan sponsor (the employer), you are a fiduciary and you have a lot of responsibility that, though they may be new to you, they have always been required, and you are just now learning that you are not living up to these requirements.
Luckily, there are people out there who can help you find out if you are doing things right, and if, most likely, you are not….they can help reduce the amount of time that you spend putting the correct systems in place, and reducing the likelihood that you are adversely affected should the DOL come knocking on your door…. you just need to know where to find them!
This is where firms like WealthSmith Financial Planning can help. My Broker/Dealer has partnered with Pension Resources Institute so that I can help you achieve a better Employer Sponsored Retirement Plan, and help keep you clear of wondering “is my plan fine….or am I about to get fined”? (6) Let us come in and do an audit of your plan, at no cost to you. If we find areas that are not up to snuff, we can remedy the situation.
About the Author:
Gary R. Smith is the founder of WealthSmith Financial Planning, and he has been helping clients navigate the rules and regulations surrounding financial services industry for 23 years. His broad knowledge in the employer sponsored retirement plan market, financial planning, estate planning, and elder law issues make him a trusted advisor to clients looking to navigate an increasingly-complex universe of options. He is also sought out by the national media for his insights into financial issues, recently providing expert comment for articles on and in Financial Advisor Magazine.
As a wealth manager and investment advisor representative, Gary provides comprehensive financial and retirement plans for his diverse clientele, taking into account the myriad financial, regulatory, and tax issues relevant to individual financial planning. Utilizing a broad network of specialized attorneys and accountants, he offers a “team” approach that emphasizes holistic services tailored to the needs of each client.
Gary is a Certified Financial Planning Professional, a Chartered Financial Consultant, and an Accredited Investment Fiduciary. You can reach out to him with questions or inquiries at or (207) 850-0075. His office is located at 75 Pearl Street, Suite 216; Portland, ME 04101. Learn more about WealthSmith Financial Planning at
(1) Planning for Retirement Needs – David A. Littell & Kenn Beam Tacchino; Chapter 3; Learning Objective 3.8.
(2) Human Resources Executive Online: The DOLs move to increase ERISA Audits: (3) FI360-Identifying the fiduciaries-Posted by Bennett Aikin on January 15, 2015 in Fiduciary Basics; (4) (5) Pension Resources Institute –,
orIcon=%23FFFFFF&colorHighlight=%23faa71c&direct=false&no_ctrl=0&auto_hide=1&viewers_limit=0&cc_position=bottom&cc_positionOffset=70&cc_multiplier=0.03&cc_textColor=%23ffffff&cc_textOutlineColor=%23000000&cc_bkgColor=%23000000&cc_bkgAlpha=0.7, At 1:55 seconds of the webcast Is Your Company’s Retirement Plan Fine, or About to Be Fined? – Fred Barstein – March 17,2016.

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