Retirement Plan Sponsors and Fiduciary Risk

Abstract

Retirement plans have become the focus of increasing scrutiny as business corruption and financial scandals have come to light. Plan participants are asking more questions, and plan fiduciaries are increasingly concerned about their personal responsibilities and liability. A plan fiduciary who breaches the fiduciary requirements of ERISA can be held personally liable for losses sustained by the plan. The fiduciary also is liable for the breaches of other fiduciaries associated with the plan if the fiduciary participates knowingly or conceals a breach or does not make the effort to remedy the circumstances. In addition to personal liability, the fiduciary could be liable for attorney fees, punitive damages, lost profits of the plan, and civil penalties. Documentation and best practices form the basis not only for sound management of the plan and its assets but also for reducing the risk of any claims of wrongdoing on the part of the fudiciaries.