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Avoid liability on investment advice given to staff

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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.

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