Educating employees on the current economy crisis.....
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31 Posts
I had a phone call from one of our vested employees this morning who was panicking due to taking another major hit on his 401k (his portfolio is down -40.5%). We have received several calls like this and I am starting to wonder if it might not be better to be pre-emptive. I am tossing around the idea of writing an "article" talking about what's going on in the economy right now and what economists are recommending we do about it. Our employees are panicking but not taking the time to read and listen to gather information to become better informed. So my question is this: are there any laws or regulations regarding giving information to our employees? I don't want to cross the line by giving them advice and open ourselves up for possible lawsuits, but at the same time I feel we have a responsibility to help them educate themselves. Has anyone else sent out any memos or information regarding what's going on with the stock market and economy right now?
Comments
I agree with efeldman. I would have your provider come in and talk individually with the employees. They are the "experts" on this matter.
A third vote for seeing what resources your recordkeeper/provider has to give out. I would not personally write something.
The question also becomes are you a fiduciary of the plan? i.e. someone who could be held liable for bad plan decisions? If so, your responsibility is much higher than others. http://www.dol.gov/ebsa/publications/fiduciaryresponsibility.html Could this communication throw you into a fiduciary position? It might.
"....The duty to act prudently is one of a fiduciary’s central responsibilities under ERISA. It requires expertise in a variety of areas, such as investments. Lacking that expertise, a fiduciary will want to hire someone with that professional knowledge to carry out the investment and other functions. Prudence focuses on the process for making fiduciary decisions...."
I am a fiduciary on our 401(k) plan and I would never write something because I lack the expertise. However, I am responsible to make sure the plan fees are reasonable and the plan is run in a manner that is to the best interests of the employees.
On HR.BLR.Com, there is extended discussion of employers' obligations and liabilities regarding employees' 401(k) investments. This discussion can be found at the link below: (note : you have to be a subscriber to hr.blr.com to see it.) If you're not, and you want a copy, email me at RBRADY@blr.com, and I'll send it to you. (I'm a BLR staffer)
http://hr.blr.com/analysis.aspx?topic=1&collapse=true
All plan sponsors are automatically considered fiduciaries. This is not something you can avoid. There are however various safeguards that can be used (ie. ERISA Section 404(c) compliance) to provide relief of some fiduciary liabilities.
Depending on the size of your plan, Principal Financial may or may not have assigned your company an account executive. One thing I can assure you of, is that Principal is not going to "advise" your employees. This is the job of the broker of record, who may or may not be licensed to do so. Unfortunately because the Principal plan is an insurance based plan (group annuity), the SEC and FINRA have allowed individuals with only a life insurance license to broker the plans to businesses. A life insurance license does not qualify the broker as a Registered Representative or a Registered Investment Advisor.
What State are you in?
Regards,
- Jay