Plan fiduciaries are increasingly accountable for the plans they manage, even to the point of personal liability. To help you understand how to minimize your personal and corporate risk, I first want to define ‘fiduciary.’ Plan sponsors are fiduciaries, but so are all parties who exercise discretion or control over a plan. ERISA (Employee Retirement Income Security Act) established standards of conduct for plan fiduciaries. According to the Department of Labor, retirement plan fiduciary responsibilities are to:
- Act solely in the interest of plan participants and their beneficiaries with the exclusive purpose of providing benefits to them
- Carry out duties prudently
- Follow plan documents (unless inconsistent with ERISA)
- Diversify plan investments
- Pay only reasonable plan expenses
While liable for personal actions, fiduciaries may also be liable for the actions of co-fiduciaries. Monitoring of fees is a good example of areas where co-fiduciaries may be involved. And, many high profile lawsuits have occurred over the issue of fees paid to vendors for plan expenses.
To protect the financial interests of a company (and responsible individuals), fiduciaries must:
- Understand the scope of fiduciary responsibilities
- Identify and monitor the roles and responsibilities of all co-fiduciaries
- Follow the plan document
- Document all contracts, services, expenses, decisions
- Secure fiduciary insurance and ERISA bonds as needed
Next week, I’ll give you some specific ways that you can safeguard your plan and your position.
Updates from the 2017 CSPEN Annual Conference
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