With all of these limitations and the risk of

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investment needs of the participants. With all of these limitations and the risk of regulatory oversight, why would anyone willingly agree to become a plan fiduciary? Just like the risk-reward tradeoff, there is an expectation of attractive compensation with assuming the personal risk. Another reason is that the personal liability can be minimized through various possible steps. The first step in this risk-limiting process is to document every action is taken and every decision made relative to the discharge of fiduciary duties. If every action taken is documented and it fits within the limits of the law and the plan document, then there is nothing to fear. It is also important that the various roles of plan administration and investment supervision be specifically allocated to specific people so that it is clear who makes which decisions. In real estate, there is a phrase that the most important determinant of a property’s value is location, location, location. In the world of fiduciary duty, a vital component is delegation, delegation, delegation. If the fiduciary does not have expertise in an area, then they are obligated to delegate the function to a paid professional who is an expert. The icing on the cake of fiduciary risk mitigation is to outsource the risk to an insurance carrier. The fiduciary, or more likely their employer, can purchase a fiduciary bond , which is an insurance contract that will pay benefits if a fiduciary breach occurs. This series of protective mechanisms transforms the fiduciary relationship into a moderate return “investment” with limited risk. With this risk profile, professionals are much more willing to accept the fiduciary mantle.
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  • Spring '14
  • VOSS,JAMESA
  • Cash balance plan, HCES

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