Dalbar - CFO 401(k) Buyers Guide

Are you at risk with your 401(k) plan?

The 2008 Supreme Court decision in the case of LaRue v DeWolff exposes employers to claims of loss from any retirement plan participant, if there is a fiduciary breach. This new risk makes it critical to avoid fiduciary breaches.

Fiduciary breaches are critical because many employees will make small claims, each of which may involve several thousand dollars in settlements and legal fees. The effect of these multiple cases can be very costly for even the most well-intentioned employer.

Protection from these multiple claims requires that employers take steps to prevent fiduciary breaches and obtain adequate insurance, in the event of a claim.

Prevention starts with correcting any existing breaches but complex rules and regulations make detecting breaches very difficult. Your current service providers may not be aware or highlight existing fiduciary breaches for fear of losing you as a client.

The Fiduciary Risk Assessment (FRA) is simple first step in identifying existing fiduciary breaches. An employer can use FRA privately to determine if there are fiduciary breaches that increase exposure to employee claims by answering a series of confidential questions.

the Confidential Fiduciary Risk Assessment Worksheet

Very few plans can claim to be entirely free of fiduciary breaches. The following are the most common fiduciary breaches that may have gone unnoticed in the past, but today, create exposure to participant claims:

An investment line-up that underperforms or is high cost without the procedural prudence of regular reviews. Every plan must perform regular investment reviews.
Obtaining advice on establishment or change to an investment line-up without using procedural prudence to select the adviser and the investments. Adviser selection and investment selection must be documented.
Participant receiving advice about which investments to select without the protection afforded by the Fiduciary Adviser. Helpful verbal advice to a participant can be a fiduciary breach that makes an employer liable if losses are incurred.
Failing to ensure that every participant has sufficient information to make informed decisions without a qualified default investment alternative (QDIA). Enrollment meetings and educational materials offer no protection from participants claiming the fiduciary breach of insufficient information.
Failure to make required disclosures. There is no protection for this failure.

Assessment Procedure

The Fiduciary Risk Assessment will identify fiduciary breaches that may exist in your plan and if necessary, make recommendations for further analysis or steps that should be taken.

Performing the assessment is simple. Obtain and complete the Fiduciary Risk Disclosure Worksheet and send to FRA@DALBAR.COM. After receipt of payment you will receive a confidential evaluation of the fiduciary risk associated with your participant directed 401(k) plan and recommendations for reducing fiduciary risk.

Confidential evaluation fee for companies that agree to permit their disclosures in an aggregated statistical benchmark.	$1,500
(Available through June 2008) Confidential evaluation fee for companies that are not included in statistical benchmark	$5,000

the Confidential Fiduciary Risk Assessment Worksheet