Benefit Plan Insights: 5 Common ERISA Red Flags
Any size retirement plan can run into serious trouble when sponsors aren’t careful. With some reasonable planning, your qualified retirement plan doesn’t have to be the target of the Employee Retirement Income Security Act (ERISA) litigation. Below we have included the top five most common red flags leading to litigation.
Create an investment policy statement (IPS) to articulate your vision for plan investments overall, and the investment options you want to make available to participants. The IPS should clearly state:
- What kind of assets you’ll include in investment options,
- The degree of investment risk and volatility that’s acceptable,
- How you’ll assess investment performance, and
- When you’ll change managers.
Although having an IPS isn’t obligatory, doing so can show that you’re exercising procedural prudence — provided you can document your compliance with it. Merely signaling prudence won’t get you off the hook; following carefully crafted procedures and policies will go a long way toward preventing missteps that could lead to litigation in the first place. If you already have an IPS, be sure to follow it.
Avoiding ERISA litigation is on every plan sponsor’s wish list. Reviewing expenses, fee structures, and bundled services, and creating and following an IPS, can help you achieve this. Start by making a periodic review of these areas the norm, in good times and bad.
Cindy H. Mitchell?>
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