If you’re offering a retirement savings plan to your small business, you’re providing your employees a great service. What you may not realize: you could also be exposing your business to legal liability.
Now, with CensiblyYours® Custom Index Portfolios, you can offer low-cost, index-based, flexible investment options to your employees without the risk of liability. Ubiquity’s partner, Kaye Capital Management, takes on the role of a third-party 3(38) investment manager (also called an “investment fiduciary”) for your plan. Kaye Capital Management builds your investment lineup and continually monitors the investments in your plan to ensure that it meets and even exceeds federal investment fiduciary standards.
Your employees can grow their savings with prudent investment options at low costs, all while only paying a small, flat service fee per participant. This means that no matter how much you and your employees save, your fees stay the same. Meanwhile, you can focus on growing your business while Kaye Capital Management takes on the complexity and legal liability of managing your 401(k) investments.
At Ubiquity, we’re continuously striving to help you be the best retirement plan sponsor you can be. This means protecting you from the risks associated with managing a 401(k) plan, while offering your employees low-cost , flat-fee investment options to secure their financial future.
We know that the last thing small businesses want is more complexity—or added exposure to legal liability. That’s why we now offer 401(k) plans that include ERISA 3(38) investment fiduciary services, providing a single, simple 401(k) plan.
CensiblyYours® Custom Index Portfolios, offered through Kaye Capital Management, provides the investment management expertise everything you need to offer a retirement plan that meets all ERISA 3(38) fiduciary investment obligations.
Kaye Capital Management has created a low-cost and competitive passive fund lineup that is re-evaluated every quarter to ensure it remains that way. After asking your employees a few simple questions about their investment objectives and future goals, they Kaye Capital identify your employee’s individual risk profiles and builds investment models tuned to your employees’ individual goals to ensure financial wellness.
All that, plus they formally take on the role and responsibility of ERISA 3(38) investment manager, so you don’t have to worry about meeting all of those investment fiduciary duties obligations yourself.
Under federal law, sponsors of 401(k) retirement plans have a fiduciary responsibility to their employees to choose and maintain responsible investment options with reasonable fees.
But how can you be sure your investment lineup meets that standard? More small businesses are taking the simplest, safest approach: delegating the investment fiduciary role to a 3(38) investment manager.
It is important to take extra care when you’re selecting a third-party 3(38) investment fiduciary. Plans that don’t provide prudent investments with reasonable fees often face participant lawsuits. Employers or authorized individual business owners and administrators who are found to have failed in carrying out these investment fiduciary obligations, will can be considered held personally liable in a court of law.
Investment fiduciary obligations for retirement plans are spelled out in the Employee Retirement Income Security Act (ERISA).
All the rules and regulations about retirement plan investment selections can seem complicated, but they boil down to a simple principle: employees can’t be expected to be financial experts. So whoever is setting up and monitoring the retirement plan needs to be accountable for making responsible choices. The party accountable (and legally liable) for the plan investments is called an “investment fiduciary.”
The federal government takes investment fiduciary responsibilities seriously. Businesses are often subject to Department of Labor (DOL) audits and investigations to verify that their retirement plans offer responsible investment options with reasonable fees. If they don’t, the business can be subject to stiff penalties, as well as litigation from any employees who have been impacted by a poorly constructed plan.
For all of these reasons, more businesses are choosing retirement plans with “3(38) investment fiduciary services.” With these plans, a third-party investment manager acts as a prudent investment fiduciary for the 401(k) and shoulders the responsibility of meeting ERISA investment fiduciary obligations. They help build and sign off on the investment lineup.
They continually monitor the plan to make sure it stays in compliance. They help you respond to DOL audits. They maintain investment fiduciary liability insurance over the plan errors and omissions insurance, so if litigation ever arises about your investment, they bear the legal liability—not you or your business.
ERISA sets a very high standard for investment fiduciaries. It’s not enough to be a generally responsible or financially savvy layperson. ERISA 3(38) investment fiduciaries are expected to have expert professional investment knowledge to identify risky investments and exorbitant fees.
And if you’re not using a third-party 3(38) investment manager for your business’ 401(k) plan, the ones ultimately responsible for meeting those investment fiduciary obligations are you and your business.
Investment advisors can be tremendously helpful in creating and managing your business’ 401(k). But unless they have specifically agreed to take on that ERISA 3(38) investment fiduciary role, you are solely responsible for any investment decisions in the plan. Some investment advisors fall under other sections of ERISA, such as 3(21). While 3(21) advisors may share some of the investment fiduciary duties with the business, the ultimate responsibility for meeting ERISA 3(38) investment fiduciary obligations—and legal liability if the plan doesn’t—falls on your shoulders.
When you choose a Ubiquity retirement plan with ERISA 3(38) investment fiduciary services, you and your employees pay a small flat monthly administrative fee to have your plan managed by Ubiquity’s partner, Kaye Capital Management, a third-party 3(38) investment manager. Unlike many 3(38) investment fiduciary services, these fees are not based on the amount of assets under management. With Ubiquity, you and your participants will always pay a small flat fee, no matter how large your savings grow.
As part of this service, Ubiquity’s partner Kaye Capital Management will:
By working with Ubiquity Retirement + Savings, you get:
Most ERISA 3(38) investment fiduciary services come with fees that are based on the amount of assets in the plan.
As you and your employees save more for your retirement, those fees can add up quickly. Under the typical fee structure, when a retirement plan balance grows to $3 million, 3(38) investment manager fees can cost as much as $15,000 per year (given a standard 50 basis points (bps) or 0.5% per annum cost).
At Ubiquity, we think that you or and your employees should not be penalized just for saving more for retirement. The flat fees for 3(38) investment fiduciary services can save employees thousands of dollars per year compared to plans that pay a percentage of their balance, otherwise known as assets under management (AUM)-based fees. The more you and your employees save on fees, the more you’ll save over the lifetime of your account.
Offering your employees a valuable retirement benefit shouldn’t mean exposing them—or your company—to undue risk. Choose CensiblyYours® Custom Index Portfolios to protect your employees’ financial wellness while safeguarding your business.