Providing information helps your company meet its ERISA 404c compliance responsibilities
ERISA Section 404c says companies that sponsor a 401k plan need to, among other things, provide their employees with adequate information about 401k investing, their plans' particular 401k investments, as well as related matters.
401k Solution includes substantial investment and investing information as well as links to external sources that your employees can choose to access as they see fit:
Please note that the auxiliary investment advice services are NOT included with 401k Solution. They can, however, be paid for by the plan participants who choose to use them (see topic 3, below), and they offer benefit to your 401k plan simply in being mentioned.
401k Solution includes substantial investment and investing information as well as links to external sources that your employees can choose to access as they see fit:
Our Plan Participation Gateway houses, among other things, general and plan-specific disclosure and investment education information. Your employees have free access to your company plan's customized Plan Participation Gateway from any location connected to the Internet.
In addition, 401k Solution provides your employees with Internet links to personal investment advice services that are available online and/or from SEC-registered Investment
Advisors (see below for a partial listing of such services).
Please note that the auxiliary investment advice services are NOT included with 401k Solution. They can, however, be paid for by the plan participants who choose to use them (see topic 3, below), and they offer benefit to your 401k plan simply in being mentioned.
The investment advice services linked to 401k Solution are INDEPENDENT investment advisors; none sell mutual funds, stocks, insurance products or any other investments nor receive commissions of any kind on investments they recommend. In addition, none have paid any fee or otherwise compensated 401k Solution for being mentioned within our 401k websites.
Informing plan participants about such 401k investment guidance services, coupled with providing the basic investing information included in your customized 401k Solution site and provided by the investment companies, helps you fulfill your ERISA 404c responsibility to provide adequate investment information and guidance to 401k participants, yet the process requires minimal effort and expense.
See below for a listing of personal investment advice services that are available online.
ERISA 404c protection for plans that use self-directed brokerage accounts
Because self-directed brokerage accounts do not fall under the definition of "designated investments" for 401k plans, companies have no specific sets of information, such as investment prospectuses and performance information, that they must provide to plan participants regarding self-directed brokerage account investments. What does need to be provided is:
With the exception of disclosure regarding investment through self-directed brokerage accounts, the above must also be supplied for plans using "designated" investments, such as mutual funds.
For more information about designated and no designated investments and their 404c compliance ramifications, please read Panel Publishers 401(k) Advisor article, "Personal Brokerage Accounts: Is 404c Protection Available?" September, 1999.
A statement that the plan intends to be a 404c plan and that the fiduciaries will be relieved of liability.
The identity of a 404c fiduciary.
A description of available investment alternatives, with specific information about designated alternatives (i.e., specific mutual funds being offered within the plan in addition to the self-directed brokerage accounts).
General disclosure regarding investment through a self-directed brokerage account.
With the exception of disclosure regarding investment through self-directed brokerage accounts, the above must also be supplied for plans using "designated" investments, such as mutual funds.
With 401k Solution, you're covered - Your plan's customized Summary Plan Description, Plan Enrollment Form and related documents provide the above 404c-related information to your employees, and all 401k Solution documents are easy for lay people to read and understand.
For more information about designated and no designated investments and their 404c compliance ramifications, please read Panel Publishers 401(k) Advisor article, "Personal Brokerage Accounts: Is 404c Protection Available?" September, 1999.
About the required fidelity bond (ERISA bond/fiduciary bond)
ERISA regulations require that all pension plans, including 401k plans, be insured by an ERISA bond that has a payout equal to 10% of plan assets or $500,000, whichever is less. The annual premiums for these special ERISA bonds (also called fiduciary bonds) are very low, averaging approximately $200 per year or less.
ERISA bonds are not only inexpensive, but they are readily available and easy to purchase. Your business insurance agent is the best person to contact for ERISA bond coverage. Insurance companies that provide inexpensive ERISA bond coverage include:
Below are answers to a few frequently asked questions about ERISA bonds:
What i the difference between an ERISA bond, a fidelity bond, and a fiduciary bond?
ERISA bonds and fiduciary bonds are essentially amended fidelity bonds. All three respond to claims involving dishonest acts on the part of asset investment advisors or the employer. The ERISA bond, sometimes referred to as a fiduciary bond, pays claims directly to the plan participants. The fidelity bond pays the claims of the investment advisor that resulted from the dishonest acts of the investment advisor's employees.
How do fidelity bonds and ERISA or fiduciary bonds differ from errors omissions insurance?
The fidelity, ERISA and fiduciary bonds cover against losses due to a criminal act. Errors and omissions insurance provides employers and advisors with coverage against losses due to any actual or alleged negligent act or error committed while engaged in performing professional services.
What's the difference between errors and omissions insurance and fiduciary liability insurance?
Errors and omissions policies protect the investment advisor and employer from losses due to an actual or alleged negligent act. In comparison, fiduciary liability insurance is a sub-category of errors and omissions insurance, and provides additional coverage against a breach by any plan fiduciary. This coverage is not the same as provided by an ERISA bond because it does not insure against criminal acts on the part of a plan fiduciary.
An ERISA bond that covers a 401k plan with $100,000 in assets can cost as little as $100 per year; an ERISA bond covering plan assets of $1 million costs approximately $275 per year.
ERISA bonds are not only inexpensive, but they are readily available and easy to purchase. Your business insurance agent is the best person to contact for ERISA bond coverage. Insurance companies that provide inexpensive ERISA bond coverage include:
CHUBB Insurance (contact local agent)
Hartford Insurance, call (888) 656-0817
Travelers Insurance, call (860) 954-2650
Maloney & Associates, call (760) 738-2610
Below are answers to a few frequently asked questions about ERISA bonds:
What i the difference between an ERISA bond, a fidelity bond, and a fiduciary bond?
ERISA bonds and fiduciary bonds are essentially amended fidelity bonds. All three respond to claims involving dishonest acts on the part of asset investment advisors or the employer. The ERISA bond, sometimes referred to as a fiduciary bond, pays claims directly to the plan participants. The fidelity bond pays the claims of the investment advisor that resulted from the dishonest acts of the investment advisor's employees.
How do fidelity bonds and ERISA or fiduciary bonds differ from errors omissions insurance?
The fidelity, ERISA and fiduciary bonds cover against losses due to a criminal act. Errors and omissions insurance provides employers and advisors with coverage against losses due to any actual or alleged negligent act or error committed while engaged in performing professional services.
What's the difference between errors and omissions insurance and fiduciary liability insurance?
Errors and omissions policies protect the investment advisor and employer from losses due to an actual or alleged negligent act. In comparison, fiduciary liability insurance is a sub-category of errors and omissions insurance, and provides additional coverage against a breach by any plan fiduciary. This coverage is not the same as provided by an ERISA bond because it does not insure against criminal acts on the part of a plan fiduciary.
We prepare your plan's SIGNATURE READY annual IRS 5500
The full-service 401k Solution includes preparation of the IRS 5500 and other related governmental reporting forms, subject to the terms of the 401k End-User License Agreement.