A company’s 401(k) plan is managed by a third party. This third party only offers three aggressive investment selections. The value of these plans dropped significantly due to unforeseen economic news. A group of employees brought suit against the company, claiming that it chose a 401(k) administrator that did not provide adequate choices, and offered too few conservative investment opportunities.
Defense costs: $115,000
Total costs: $185,000
- Use third-party 401(k) administrators that provide an array of investment selections and risk diversity.
- Educate your employees about diversification and personal tolerance for risk.
- Get signed “hold harmless agreements” from employees stating they understand the risk they’re taking and have read the investment prospectus.