New Regs Covering Default 401(k) Investments Provide Fiduciary Relief For Plan Sponsors — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily
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New Regs Covering Default 401(k) Investments Provide Fiduciary Relief For Plan Sponsors

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Currently, many plan sponsors use money market or similar investments when they must invest employees' 401(k) contributions without direction from them — so-called default investments. Plan sponsors were afraid that other investment options could potentially lead to fiduciary-based lawsuits. With the expected rise of employers using negative-option 401(k)s due to the passage of the Pension Protection Act of 2006, Congress realized that money market investments would not give participants the necessary returns needed for their retirement. As part of the Act, they directed the DOL to issue new regulations that would provide fiduciary relief for plan sponsors that offered default investments other than just money market accounts.

 

On September 27, 2006, the Employee Benefits Security Administration (part of the DOL) issued proposed regulations that relieve plan sponsors of fiduciary liability if they off...(register to read more)

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