Recent events have put a spotlight on the critical topic of fiduciary responsibilities and the repercussions of violations within retirement plans. As stewards of these plans, understanding our obligations and the potential penalties for non-compliance is more crucial than ever.
A fiduciary is anyone who exercises discretionary authority or control over a retirement plan's management or its assets, including anyone who provides investment advice to the plan. Failing to adhere to the principles of prudence, diversification, adherence to the plan documents, and acting in the best interest of the participants can lead to significant consequences.
Violations can result in:
- Civil Penalties: The Department of Labor (DOL) can enforce actions to correct violations, including the restoration of losses to the plan and the implementation of necessary measures to prevent future breaches.
- Excise Taxes and Penalties: The IRS can impose excise taxes on prohibited transactions and other breaches of fiduciary duty.
- Personal Liability: Perhaps most daunting is the personal liability fiduciaries may face for breaches of their responsibilities, including reimbursing the plan for losses incurred due to the breach.
These penalties underscore the importance of diligent plan management and the need for continuous education on the evolving landscape of fiduciary duty.
Let’s use this as a reminder to review our practices, ensure compliance with ERISA standards, and seek expert advice when necessary. The responsibility is great, but so is the opportunity to positively impact the financial well-being of our employees.
#RetirementPlanning #Compliance #HR #BusinessLeadership
The concepts illustrated here have legal, accounting and tax implications. Neither Janney Montgomery Scott LLC nor its Financial Advisors give tax, legal, or accounting advice. Please consult with the appropriate professional for advice concerning your individual circumstances. For more information about Janney, please see Janney's Relationship Summary (Form CRS) on www.janney.com/crs which details all material facts about the scope and terms of our relationship with you and any potential conflicts of interest.
