In addition, compensation packages have become incentives "laden with bonuses "offered in the form of company stock options. These changes have tied employees closer to the performance and profitability of the organization. In many cases, it puts one's financial future at more risk. Employers who sponsor retirement plans assume a fiduciary responsibility for these plans. This responsibility can be magnified when company stock is an investment option within a 401(k), or if bonuses or company matches are limited to company stock. In recent years, many people both working and retired, have seen the results of this magnification due to overexposure to one company's stock. Herein lies the assumed responsibility that many employers do not identify. It can be a potentially moral and legal liability. .
How can employers help safeguard themselves from potentially being held responsible for these elements of their benefit plan? .
• Have a stated investment policy. .
• Demonstrate that you are complying with ERISA 404(c) guidelines. .
• Provide the three core investments required by ERISA. .
• Provide Internet access and daily valuations. .
An employer's legal responsibility as a fiduciary for retirement plans is somewhat clear, perhaps, compared to the moral responsibilities that accompany employing someone. With the overload of financial information provided to employees today (both at work and home) today, many employees do not understand how their benefits package coincides with what they are doing personally. .
This lack of coordination leads to: .
• Overspending or duplicating coverages. .
• Potential for improper investment allocations. .
• Gaping holes in their overall financial plan. .
• General confusion between work and personally provided benefits. .
It is so central to providing core benefits to its employees that they should also play a key role in how these benefits tie into personally provided financial planning.