Res Ipsa Loquitor
RES IPSA
LOQUITOR
SAFE HARBORS
“The purpose of government
is to enable the people of a
nation to live in safety and
happiness. Government exists
for the interests of the governed, not for the governors.”
—Thomas Jefferson
DIANA K.
POWELL,
ESQ.
16 | WINTER 2014
L
iability is the state of being
responsible for something—
legal liability, in particular,
tends to create a feeling
of unease. According to
Investopedia, in business liability is defined
as a company’s legal debts or obligations
that arise during the course of business
operations. Liabilities are settled over time
through the transfer of economic benefits
including money, goods or services. It is in
the goal of corporate retirement committees to
provide the best options for their employees
while limiting their corporations’ liability.
Before President Bush signed the Pension
Protection Act (PPA) into law in 2006,
employers were hesitant to adopt automatic
enrollment options for employees’401(k)-type
pension plans due to fear of legal liability
for “market fluctuations and applicability
of state wage withholding laws.” (DOL)
After the PPA was signed and corporate
liability was reduced, more companies began
to offer plans that included an automatic
enrollment option, which has led to an
increase in employee participation. This
increase in participation was the goal of the
Department of Labor’s regulation.
A safe harbor is a “legal provision to reduce
or eliminate liability as long as good faith is
demonstrated” and was created under ERISA
to “protect management from liability for
making financial projections and forecasts
made in good faith” (Investopedia). The
DOL states a Qualified Default Investment
Alternative (QDIA) is a safe harbor investment
created by the PPA.
According to the IRS, a safe harbor 401(k)
is similar to a traditional 401(k) plan, but the
employer is required to make contributions