To be competitive, most employers offer some employee benefits: generally, at least medical benefits through a cafeteria plan, and a 401(k) plan. Benefit plans are complicated. It is difficult to keep up with all of the compliance requirements when it’s one’s full-time job, let alone if that’s coupled with trying to run a business. People try to reduce their risk by hiring benefits consultants and advisors or having their 401(k) plans comply with Section 404(c). But there are still several common mistakes that employers make that put their business – and even their personal assets – at unnecessary risk.
When adopting a plan, the documents will ask who is the “trustee”, “plan sponsor”, or “named fiduciary”. Employers often will designate the person in the company that makes benefits decisions, such as the business owner, chief executive, CFO, or HR executive. However, these terms have very specific legal meanings, and carry with them specific, individual, and personal liability. An individual designated as the “trustee”, “plan sponsor”, or “named fiduciary” of a benefit plan – without the limited liability shield of the company – puts his or her own home and personal assets at risk if the plan is sued. The plan documents should be reviewed to ensure that the company, not an individual, is assigned those roles.
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