Confero Winter 2014: Issue 5 | Page 19

Safe Harbors Plan sponsors who believe they are not liable because they are covered under a safe harbor, may in fact have liability due from their inability to meet all of the conditions set forth under 404(c).” for each employee. The safe harbor 401(k) eases administrative burdens on employers by eliminating some of the complex tax rules ordinarily applied to traditional 401(k) plans. QDIAs and safe harbor plans were created in the Pension Protection Act of 2006 to encourage employers to offer automatic enrollment options by limiting the liability of the plan sponsors by affording them legal protections under the safe harbor regulations. If the conditions outlined by the PPA are met, then it is possible for plan sponsors to find relief from fiduciary liability. However, plan sponsors are not relieved of liability for the prudent selection and monitoring of a QDIA. (DOL) Even with the implementation of the Pension Protection Act of 2006, experts warn that liability can arise for plan sponsors due to their failure to fully comprehend the conditions set forth in the PPA. (InvestSense,LLC) As Fred Reish has been often quoted, “the vast majority of plans believe that they are 404(c) compliant, …, very few of them satisfy all of the 404(c) requirements.” (Reish, InvestSense, LLC) Therefore, plan sponsors who believe they are not liable because they are covered under a safe harbor, may in fact have liability due from their inability to meet all of the conditions set forth under 404(c). The goal of creating QDIAs by the PPA of 2006 was to provide relief from liability for investment outcomes to fiduciaries, thereby encouraging plan sponsors to offer the option of automatic enrollment to employees who did not otherwise choose to participate in the pension plans. Experts are studying the long-term effects of QDIAs. However, researches caution, “most pensionrelated research has focused on individuals’ behavior – whether workers participate in a 401(k), how much they contribute, and how they make investment choices. Even the discussion surrounding automatic enrollment has focused on how it benefits employees by increasing their pension coverage and ultimately their retirement savings. Comparatively little is known about employer decisions regar