401(k) Notices

[Guest Kabuki]

Is there a form to provide employees with a statement regarding an employer's fiduciary responsibilities under ERISA (other than a summary of 404© regulations)?

[Steve72]

I'm not sure what you mean by a "form", but there is the model notice to participants of ERISA rights. It can be found at DOL regs. 2520.104b-5.

[QDROphile]

It is a mistake to make the employer a fiduciary.

[E as in ERISA]

How can you avoid that result?

[QDROphile]

By naming fiduciaries that are not the employer and allocating the fiduciary functions appropriately among those fiduciaires.

What is it about being an employer that makes you think an employer is a fiduciary? Most employers are fiduciaries because they have plan documents that name them as the plan administrator.

[E as in ERISA]

Most exercise some degree of discretionary authority or control over the plan. I realize some decisions might be considered "settlor" functions. But can an employer really avoid doing anything that might cause it to be considered a fiduciary? Is the naming of other parties as plan administrator, trustee a pure "settlor" function? Or does the employer have some fiduciary responsibility there?

[QDROphile]

Appointing a fiduciary is a fiduciary function, but either (i) the employer does not have to name any fiduciary, or (2) if you believe that adoption of a plan document that names a fiduciary (or the fiduciary who names fiduciaries) is a fiduciary function, it is at least a very limited fiduciary function and is materially better than having a more general fiduciary status.

I won't get into a discussion about Varity. The point is that the employer should not be set up to be a fiduciary, as happens with many plans because of bad plan documents or lack of thought.

[BFree]

QDROphile - please expand upon why it is a mistake and lacking in thought to have the employer named as fiduciary.

Which fiduciary duties are saying should be allocated away from the employer, to whom, and what are the extra costs for performing these duties?

[QDROphile]

Reversing the order you asked:

1. Allocate all fiduciary duties away from the employer to the persons who will be responsible for the functions. Those persons will either be employees or third parties, exactly the same as if the employer were the misnamed fiduciary. No extra cost because the same persons are performing the same functions.

2. It is a mistake to have the employer in the position because naming the "employer" tells you nothing about what person is responsible. Corporations act through many persons, and the directors and officers of a corportion are responsible for what a corporation does. If the fiduciary is not more precisely identified, any of the agents could be liable for fiduciary responsibilities, even if they were unconscious about their theoretical responsibilities. To put this in more practical terms, if the employer is a named fiduciary and someone sues for breach of fiduciary duty, each officer and director will be named individually as a defendant. I am not saying that each will be liable, but the corporation will want to avoid the embarrassment and the expense and struggle to dismiss the action against the wrong bodies. Plaintiffs will have too much leverage.

It is much better to name the persons who have the functions. They will know that they have the responsibility and they will answer if a claim arises. Everyone else should be left alone, and if not, will have an easier time with extrication. We have stomped all over plaintiffs who try to sue and fail to name the fiduciaries when the fiduciaries are precisely identified in plan documents and records. Persons who do not have the responsibility will not have to worry and will be less likely to interfere with or waste time on matters that are not theirs.

[Kirk Maldonado]

I concur completely with QDROPhile.

[E as in ERISA]

My concern is that employers often believe that they have relieved themselves of a lot more responsibility (and liability) than they actually have. So they fail to perform their duties.