CPAs Hold Umbrella of Protection Against Gathering ‘Legal Storm’

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Like a sudden summer thunderstorm, the surprising number of ERISA-related lawsuits filed last year – more than 11,000 according to the Administrative Office of the U.S. Courts – seems to have blown in out of nowhere.

In reality, the Department of Labor has been predicting this “Legal Storm” for more than a year. In May 2004, Secretary of Labor Elaine Chao launched the DOL's “Road Show” with a warning to CEOs and Corporate Boards about the potential liabilities their companies face for failing to provide ERISA-related fiduciary obligations.

One of these obligations is to provide unbiased Financial Literacy Education for their employees. This specific education must come from an unbiased resource not connected to the corporation or the Plan itself, such as the 401(k) Provider. Many companies are unaware that not only can the corporation be sued for not providing this education, but the Trustee of the Plan, the CEO and Board Members can also be held personally responsible if this obligation is not met.

The concern in the accounting profession is that CPAs who are not educating their corporate clients, or who are failing to disclose in their Opinion Letters the steps their clients have taken to fulfill their ERISA obligations, will not only increase the potential for more litigation claims against their clients, but may also be included as possible defendants in any ERISA-related lawsuit.

The truth is, most CPAs are unaware of ERISA 404(c) and the subsequent Interpretive Bulletins related to the obligation corporations have to provide unbiased Financial Literacy Education to their employees. And yet, CPAs are in the ideal position to provide “Safe Harbor” protection for their own clients, and for other companies in their area, by providing unbiased Financial Literacy Education to employees.

Corporations around the country are responding to the growing threat of ERISA-related lawsuits by putting Financial Literacy Education at the top of the list when deciding what benefits to provide employees. For five years in a row, Benefits Directors have said providing more Financial Education to employees is one of their Top 5 priorities, according to studies conducted by Deloitte & Touche.

Adapting to the changing needs of their clients has led many CPAs into areas of specialization. “Personal Financial Specialists” is one designation that has garnered a lot of recent interest. It seems everyone in the corporate world and the business media is reacting to the impending flood of baby boomers ready to retire in the next couple of decades. And what we are learning is that baby boomers aren't ready to retire - at least not financially.

According to Merrill Lynch & Co. Inc.'s recently released “New Retirement Survey,” 75 million baby boomers will be leaving the full-time workforce over the next 20 to 25 years. A study by Nuveen Investments found that a paltry 29% of adults ages 55 to 65 have done any post-retirement planning; a whopping 66% responded that they had underestimated their post-retirement needs.

CPAs interested in attracting top-end baby boomers are finding that offering Financial Literacy Education in the corporate marketplace can not only protect their clients from possible ERISA-related litigation, it can also give them exposure to hundreds of potential clients.

The growing corporate demand for unbiased Financial Literacy Education, its minimal liability exposure and the increased market visibility this education provides makes Financial Literacy Education a promising avenue for progressive CPAs to explore. In a recent editorial, the Pennsylvania CPA Journal acknowledged that evidence suggests the CPA profession is moving in the direction of specialization.

If corporations recognize that providing Financial Literacy Education is a cost-effective solution to reducing ERISA-related liabilities while helping their employees plan for the future and their CPA isn't offering this service, then they will find a CPA firm that is.

After all, the predicted “Legal Storm” is brewing, and CPAs are in an ideal position to provide an umbrella of protection against the impeding deluge of ERISA-related concerns facing their corporate clients while also sharing valuable and timely financial information with corporate employees. CPAs are encouraged to learn more about the growing trend toward specialization and the role Financial Literacy Education plays in helping them build their practices, or risk getting left out in the rain.

This article was provided by the LFE Institute. A provider of unique Financial Literacy Education to corporate America since 1986, helping more than 250,000 employees gain control of their finances. LFE's Certified Instructors help corporations fulfill their fiduciary obligations under the ERISA guidelines by providing the specific unbiased education recommended by the DOL. To learn more about how LFE is working to promote Financial Literacy Education, visit the LFE Institute.

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