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How Business Owners & Plan Sponsors can reduce liability with their 401k plans Thumbnail

How Business Owners & Plan Sponsors can reduce liability with their 401k plans

Download the episode on Spotify here / Apple here / YouTube here

Josh & Jay welcome Chris Roper, Plan Success Consultant with Qualified Plan Advisors and Tim Hakes, President of Prime Capital Investment Advisors to the Deep Fried studios for Chapter 3 of our Retirement Planning and Education (REAP) Series, a 4 part series discussing important topics that business owners should know about with their employee retirement plan offerings. 

In this episode, the guys discuss liability issues, including why the fiduciary status of plan sponsors, administrators, and advisors is so important, particularly if the IRS, Department of Labor, or a plaintiff’s attorney coming knocking at your door. From fee compression to increased litigation to more educated plan participants, the days of “set it and forget it” are over. Take a listen to what you as a business owner need to know about your 401(k) plan!

Key Takeaways:

  • Most business owners offering 401(k) plans are not aware that they could be held personally liable for decisions made in their 401(k) plan.
  • Typically the bigger your plan, the more likely that the IRS, DOL or a plaintiff’s attorney will take a look at your plan.
  • Under ERISA section 3(21) allows for co-fiduciary assistance, where a plan sponsor can hire an advisor to assist with plan duties and sit “side by side” with recommendations, but the final decision making process still falls to the plan sponsor, with the advisor serving the role of a “investment advisor”.
  • ERISA section 3(38) allows the plan sponsor to transfer most of the liability to advisor, where the advisor has decision making authority and functions as an “investment manager”. The plan sponsor still have a duty to monitor what the 3(38) is doing.
  • In the traditional broker world of 401(k) plans, there was a lot more generalists that set up plans without significant follow up diligence. In 2020 and beyond, the advisor needs to be specialized in qualified plans, where all their support team concentrates on is qualified plans. The industry has evolved for the benefit of the consumer.
  • Regulators are typically looking a process. Do you have a process in place, and have you exhibited the “Duty of Prudence”. If you don’t have the experience or technical proficiency to service in this role, then it may be appropriate to hire that expertise out.

Show Links: 














Gulf Coast Financial Advisors

Prime Capital Investment Advisors 

Qualified Plan Advisors 

Financial Fitness for Life

First Protective 

If any of these topics apply to your situation, we can help! Reach out to us at 251-327-2124, or email jnull@gulfcoastfa.com.