Your client has the responsibility as a fiduciary to manage a company’s retirement plan on behalf of plan holders and their beneficiaries.
Recently a few employees have joined forces to accuse him of mishandling his duties, which may lead to legal action. Your client has the right to respond to their charges.
ERISA requirements
A retirement plan has protections under ERISA, the Employee Retirement Income Security Act. ERISA requires a plan fiduciary to fulfill his or her responsibilities in the sole interest of plan holders and their beneficiaries. The fiduciaries include plan administrators, plan trustees and those who make up the investment committee for the plan. The fiduciary must manage the plan’s investments in such a way as to minimize the potential for large losses. He or she must also ensure that the terms of the plan comply with ERISA requirements.
Red flags
There are several signs of possible fiduciary mismanagement:
– Account statements are often late or delivered at irregular intervals to employees
– There is no reasonable explanation for a significant drop in an account balance
– The account balance does not seem accurate
– An account statement falsely indicates that a paycheck contribution was not made
– The employee did not authorize an investment that appears on the statement
A look ahead
Are the accusations of the employees justified? Retirement plan fiduciaries must act in the best interests of plan participants and beneficiaries. Mismanagement claims call for the fiduciary to defend a position taken and employ legal guidance to mount the appropriate response.