Control Risk with Good Fiduciary Practices

Control Risk with Good Fiduciary Practices

May 25, 2023

For any small business owner it’s not just what you earn—it’s what you keep. It’s not just about working hard—it’s about working smart.

One of the “smart moves” to help you keep more of what you earn, is understanding how your retirement plan for your business can help you turn otherwise taxable income into tax-deferred savings. Options for plan designs for small business owners vary along a spectrum from basic (e.g., simplified employee pension (SEP) or savings incentive match plans for employees (SIMPLE) plans), to standard 401(k) plans (group or solo) and up to profit sharing and cash balance plans that can really help you defer maximum amounts of otherwise taxable business income. But there is another question that is also wise to consider when looking to “level up” on your small business retirement plan: How do I limit my fiduciary risk when establishing and offering these types of programs? In this article we will outline the how to control risk associated with offering qualified plans, of any variety, as a small business owner.

The best way to limit fiduciary risk is—quite simply put—to be a good fiduciary. And though this may sound paradoxical, the recommendation is sound. Following good fiduciary practices is the only way to control risk associated with sponsoring a qualified plan. And if you offer any type of qualified retirement plan in your organization that covers employees, no matter how small it is, by definition you are a fiduciary and are responsible for complying with the necessary Department of Labor (DOL) standards.

The good news is controlling risk is not hard; you don’t have to be an Employee Retirement Income Security Act (ERISA) expert in all matters. Nor does it demand a great deal of time to be a good fiduciary, if you follow a good plan governance process.

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At Diversified Financial Advisors, we believe with the right plan design, we can create successful retirement outcomes for your business and employees.

We are happy to help, if you have any questions or would like additional insight, please feel free to reach out to me at joe@diversifiedfa.com or 800.307.0376.

Disclosure: This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. Investment Advice and 3(38) Investment Fiduciary services offered through Diversified Financial Advisors, LLC, a Registered Investment Advisor. 3(16) Administrative Fiduciary Services provided by PISTL Service Corporation. Discretionary Trustee services provided by Printing Industries 401k Trustees. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material. 

This material is for educational purposes only. It cannot be used for the purposes of avoiding penalties and taxes. Readers should consult with their tax advisor or attorney regarding their specific situation. The information provided has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed

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