Last week I made a presentation in the Omaha office of Jackson Lewis with the above title. I thought it might be helpful to outline the basic points of my presentation. The following items should keep you awake at night unless you can comfortably answer them:

  • Does your employer have ERISA fiduciary insurance? If you are a fiduciary for your 401(k) plan or other employee benefit plans, you have personal liability for fiduciary breaches. Therefore, you should make sure that your employer has insurance coverage for ERISA fiduciary breaches. This coverage is not the same as directors and officers coverage. Generally, it is a rider to directors and officers coverage or a separate policy.
  • Do you know the amount of fees paid by your 401(k) plan for 2015? Do you know both the fees in an absolute dollar amount and as a percent of assets? Have you compared vendor fees in the past? Are you monitoring the vendor fees at least annually? If you cannot comfortably answer all of these questions, the plaintiff lawyers and the Department of Labor are coming after you.
  • Does your 401(k) plan have an investment policy? The Department of Labor asks for this upon audit. Does your 401(k) plan have a benefits committee charter? This is important in order to make sure that you are separating settlor and fiduciary functions. Who is your 401(k) plan administrator? Is it the employer? That is generally a bad practice.
  • What standard do you impose upon your vendors? Is the standard in your vendor contract gross negligence? A gross negligence standard by your vendor is unacceptable. A gross negligence standard is a very low standard of conduct and is very difficult to prove. Similarly, what indemnification provisions does your contract have?
  • Is your investment advisor a fiduciary? Do you know? Do you get recommendations from your fiduciary? You should make sure that even if your investment advisor is not a fiduciary, you are getting recommendations from that advisor. In addition, those recommendations should be adequately documented.
  • Do you have complete, historic retirement plan records? How far back do your records go? Do you use the statute of limitations as the standard for determining when you can dispose of records? The statute of limitations is not a good standard for many documents of your retirement plan. Many retirement plan documents should be kept forever, for example, plan documents, summary plan descriptions, plan merger documents, and payment records. We see retirees request benefit payments that were made 20 years prior to the claim. Do you have the records to prove that you actually made the payment?
  • Are your temporary/staffing workers, independent contractors, and leased employees your employees for the Affordable Care Act (ACA) purposes? If you are treating a significant number of these types of workers as not your employees, ACA creates a huge down-side risk since you can only exclude 5% of eligible employees to avoid the major ACA penalty. If these types of employees are reclassified as employees, you could end up with an ACA penalty equal to $2,000 (with COLA adjustment) multiplied by the number of full-time employees you have minus the first 30.