401k Plan Fiduciary Responsibilities
Are You in Violation of Your ERISA Responsibilities?
The ABCs of the PBGC
With all the questions in the last few years surrounding corporate
malfeasance, the conduct of certain CEOs, and big-name company bankruptcies,
it may be time for a quick refresher on the Pension Benefit Guaranty
Corporation (known as the PBGC.)
The PBGC was part of landmark pension legislation in the early 1970s
known as the Employee Retirement Income Security Act, or
ERISA for short (or, as President Reagan later called it, “Every
Ridiculous Idea Since Adam ).
For the most part, the PBGC has remained
a relative constant since its inception in 1974.
It was created to
protect and insure your pension benefits.
If the company you work for goes kaput, the PBGC will step in to
pay your pension benefit.
Contrary to some very bad reporting by some
very bad journalists, your 401k is NOT protected by the PBGC.
insurance only covers defined benefit plans—those that promise to pay you a
specific monthly benefit at retirement.
If your employer offers just a
401k, as many do, the PBGC is not involved.
Said differently, those
folks at Enron who were foolish enough to put all their 401k money in Enron
stock instead of diversifying have learned a very expensive and deeply
religious investing lesson the hard way.
If you choose greed over
diversification, you might feel great in the short run.
feel both lousy and broke in the long run.
It’s your choice . . .
Where does the PBGC get the money to pay for benefits, you ask?
answer—mainly from insurance premiums charged to your employer.
of course, begs another question:
What if my cash-strapped employer
fails to pay the PBGC premiums?
Rest assured that, for the most part,
Keep in mind that the PBGC will not increase your pension yearly for
What you get as of the date your plan ended is what you’ll
get ten years later.
At the risk of sounding redundant, the difference
between a cautious retirement and a comfortable retirement is up to you.
More regulations: 404c
Want to see what Atlantic Financial can offer your company through a
Fidelity Advisor 401k Plan?
Click this PDF document
Atlantic Financial can setup new 401k plans or administer existing 401k
We can also help your company serve former employees by
transferring them out of your plan and into their own IRA account with an
IRA Rollover –
it’s better for the participants and saves the company money as well.
For more information: please contact Atlantic
Financial or contact us
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What is the Pension Benefit Guaranty Corporation (PBGC)?
Sources and Disclosures
Source: Pension Benefit Guaranty Corporation (PBGC) www.pbgc.gov
This content was originally published here.