Your Fiduciary Duty – And What To Do About It
An introduction to the article below.
The article below was a bulletin written by Andy Williams of the Golan & Christie law firm. In the article he expresses the fiduciary duty of the employer, and the steps plan sponsors should take to help their plan fiduciaries.
Your fiduciary duty, and what to do about it.
If your organization sponsors a 401(k) or other retirement plan you, or someone in your organization, is a fiduciary to that plan.
You may have hired a service provider to administer the plan (a third party administrator, or “TPA”), but the buck stops with your organization. This is because the fine print in your TPA’s service agreement says the official “Plan Administrator” is the employer, not the TPA. This means the employer has the ultimate responsibility for the plan’s ERISA compliance.
On the investment side, the plan’s trustee or investment committee will be a responsible plan fiduciary. The investment fiduciary must act with the care, skill, prudence and diligence of a prudent person “familiar with such matters.”
This is a prudent expert standard. So ask yourself, do the people making investment decisions for your plan have a financial or investment background? If not, you need to consider engaging a professional investment advisor to assist with investment decisions.
What does all this mean to you?
Plan fiduciaries do not have to make perfect decisions but they do need to exercise diligence in their deliberation on both administrative and investment matters. It is always advisable to document fiduciary deliberations as the best defense to a claim of fiduciary misconduct. Remember, good intentions never justify fiduciary misconduct including any inattention to fiduciary duties. As one federal judge put it: “A pure heart and an empty head are not an acceptable substitute for proper analysis.”
Steps that plan sponsors should take to help their plan fiduciaries:
(1) Hire an investment advisor, adopt an investment policy statement – and follow it!
(2) Meet with your investment advisor at least annually to review plan investments – and document these discussions.
(3) Perform self-help compliance checkups for your plans using IRS and Department of Labor websites.
(4) Consider fiduciary insurance (that’s not the plan’s ERISA fidelity bond).
(5) Get professional help when you need it, and consider using independent legal counsel to assure the confidentiality of sensitive plan-related information.
What is your takeaway for this?
Take another look at the bullet points immediately above. Is there any good reason not to follow each of those protective steps?
Andrew S. Williams
This article was authored by Andy Williams
Andrew S. Williams has practiced in the employee benefits and ERISA arena since ERISA was passed in 1974. He has been recognized by his peers through a survey conducted by Leading Lawyers Network as among the top 5 percent of Illinois lawyers in Small, Closely and Privately Held Business Law and Employee Benefit Law. He maintains a website, www.BenefitsLawGroupofChicago.com, with additional updates, commentary and analysis on benefits and employment topics.
The above material is intended for general information purposes and should not be relied on or construed as professional advice. The transmission of this information is not intended to create, and receipt of it does not create a lawyer-client relationship.
Copyright © 2016 Golan Christie Taglia LLP. All rights reserved.
The following is an article by Sr. Consultant on the definition of a fiduciary advisor. It is important to realize that this definition comes straight from the pension protection act of 2006.
There are four main roles in unbundled retirement plans: the advisor, an investment manager, a record keeper, and a third party administrator. The graphic below demonstrates each role and their responsibilities in relation to the plan sponsor.
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