401(k) and your employees

A lot of employers are unaware about a case that went to the Supreme Court that can affect them. It has to do with 401(k) plans. Before the ruling, which happened in Feb of 2008, it was assumed that employers were not responsible for what happened to an individual employee's 401(k) plan. This is no longer the case. Employees who have individual losses, and not just classes of employees, have the right to sue employers over the losses in their plan.



If an employer allows unwise investment choices, or extremely high fees, that employer can be liable for damages, so it is very important that an employer doesn't just "set it and forget it", when implementing a 401(k) plan.



Although the stock market is up as I am writing this, we all know how volatile the market has been over the last year or so. I think it is a wise idea to review your 401(k) plan at least once a year.

Luckily, getting a plan review isn't really that difficult. There are four key areas to look for when reviewing your plan, and you can get a full report on this by going to: http://www.californiabusinessresource.com/Why_Evaluate_Your_Business_es_401(k).html

Reviewing the plan, having an investment policy statement and sticking to it, maintaining records on educational meetings, etc, are all simple things that an employer can do to mitigate the risk.


There is also another way to mitigate the risk as well--outsource your 401(k) plan liability by engaging a Professional Employer Organization (PEO). By outsourcing your employees via a PEO, you are not only lowering your risk, but many times you are lowering the cost as well. I'll write about PEOs in another post. I think that in today's troubled times, employers must do everything that they can to lower the risk of getting sued by former or current disgruntled employees.



What do you think?