Pub. 17 2018-2019 Issue 3

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E N O . 4 , 2 0 1 8 16 new jersey auto retailer BY KEVIN ELLMAN, CFP If you have been reading about retirement plans in the business news lately, you know that the word of the day is “FIDUCIARY.” Technically, this is not really news. Plan Sponsors have always been considered Fiduciaries. What IS news is the extra attention being focused on this area and how companies that provide services to the 401(k) market may now be held to the Fiduciary Standard. Being a Fiduciary basically means that you must put the interest of your client or employee ahead of your own. In this case, to make sure that you are doing everything reasonable to preserve their retirement savings and help them save in effective ways. Dealerships that offer a 401(k) plan are encouraged to put a Fiduciary Liability Protection Plan (FLiP) in place to protect themselves. The cornerstone of any “FLiP” will be the Fidu- ciary Binder which should contain several sections: INVESTMENT POLICY STATEMENT (IPS) If you don’t have one, get one. Create and follow a simple statement of how the investments for your Plan are selected. It should also describe your process for tracking performance and when you will replace under-performing funds. INVESTMENT COMMITTEE Your IPS should be reviewed by your Investment Committee. Most companies have an Investment Committee of one person, usually the owner. Why take on this risk all by yourself ? A much better practice is to have a Committee consisting of three people. Perhaps the owner, the CFO or Human Resources employee, as well as a non-executive employee. This way the various investment decisions reflect the interests of the owner(s), executives and employees. EDUCATION POLICY STATEMENT This document spells out exactly what your plan is to educate your participants about the Plan in general, best practices for retirement savings, their specific investment choices and tips on how to use any available online tools. PLAN DOCUMENT It is essential to understand and follow your Plan Document. This document spells out who is eligible to participate and when, how your matching policy works (if any) , whether you allow loans and all the other details of your Plan. It is a good idea to review the Plan features annually. MEETING NOTES All documents that you create, review and maintain should be the focus of your regularly scheduled meetings. Meeting notes must be kept to record any actions or decisions under- taken. The key to inoculating yourself from Department of Labor (DOL) enforcement actions is to maintain a regular pa- per trail to demonstrate that you are following best practices when managing your dealership’s retirement plan. Kevin Ellman, CFP is CEO of Wealth Preservation Solutions. He can be reached at 201.632.2022 or via email at kellman@wpsllc.net . The Four “F” Words of 401(k)s: Part Three – Fiduciary Responsibilities