Avoid liability on investment advice given to staff — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Avoid liability on investment advice given to staff

by on
in Employee Benefits Program,Human Resources,Leaders & Managers,Management Training

Issue: If your organization offers a retirement plan, it has a legal responsibility for those accounts.

Risk: A rash of financial and employee benefit scandals has sparked new legal and regulatory scrutiny of retirement plans.

Action: Educate employees about their investment options in a legally safe way. Read the following to learn how.

Employees watching the wave of recent corporate scandals have been quick to blame their employers for poor-performing retirement plan investments.

Your organization isn't required to guarantee employees that nonstop gains will flow into retirement accounts. But you do have a "fiduciary responsibility" to offer a mix of appropriate investments, handle paperwork correctly and educate employees on their investment options and potential risks.

Some companies handle education duties on their own; others hire management firms. Experts say you're legally safe if you provide information to employees on:

 

  • General benefits of participating in the plan and increasing contributions.

     

     

     

  • The negative impact of early withdrawal on savings.

     

     

     

  • General investment and financial concepts, such as diversification, risk and return.

     

     

     

  • Model portfolios showing different asset allocations.

     

     

     

  • Access to performance data of various investments offered.

     

     

     

  • Work sheets, questionnaires or interactive software to help employees estimate their retirement income needs and the effect of different investing scenarios.

     

     

 

Online resources: To view materials and interactive tools you can use to educate employees, visit www.401k.org. For advice on meeting your federal benefit-plan responsibilities, visit www.dol.gov/ebsa/ compliance_assistance.html.

Leave a Comment