RPAG | Industry Trends and Technology News

Company Stock and Fiduciary Considerations

Written by RPAG | Jun 5, 2017 7:00:00 AM

In recent years, there has been a substantial increase in litigation involving retirement plans that have invested in the stock of their sponsoring company. The only definitive way for plan fiduciaries to avoid liability with respect to plan investments in employer stock is to avoid such investments altogether. Nevertheless, many employers, believing that employer stock is beneficial to their plans, continue to maintain it as an investment.

If company stock is available in your retirement plan, you may wish to consider hiring an independent fiduciary. Best practices dictates that the independent fiduciary should have no actual or perceived relationship with the company or its directors and should have exclusive control over the investment-related decisions for the plan, at least with respect to investment in company stock. This eliminates the concern regarding potential insider information and also helps to shift the fiduciary exposure to the independent fiduciary. That said, until this has been accomplished, your company’s retirement committee likely doesn’t have a choice but to monitor, and make decisions in regards to, company stock (unless the plan document expressly states that the plan must offer company stock). Absent a plan provision requiring company stock, the fiduciaries remain tasked with taking prudent action in the best interests of participants, which includes actions taken with respect to the company stock. For more information, contact your retirement plan advisor.

ACR# 244910 06/17