An employee benefit plan fiduciary is not always based on a person’s title, but the responsibility for certain actions involved in operating a retirement plan can make you a fiduciary. It is important to understand your role as it relates to your Company’s employee benefit plan and know whether you are a fiduciary and the related responsibilities and risks for serving in this capacity.
Federal regulations require a plan must have at least one fiduciary named, in its written plan, as having control over the plan’s operation. The named fiduciary can be an individual, administrative committee, the company’s board of directors or a committee of the board. However, others can also be brought into this capacity based on their involvement and oversight of the plan.
Fiduciaries have important responsibilities and are subject to standards of conduct because they act on behalf of participants and beneficiaries in a retirement plan. These responsibilities include:
- • Acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them;
- • Carrying out their duties prudently;
- • Following the plan documents (unless inconsistent with ERISA);
- • Diversifying plan investments; and
- • Paying only reasonable plan expenses.
Complying with the terms of your plan document is an extremely important responsibility. Whether or not you are a named fiduciary, if you are responsible for a process at the company that relates to the plan, i.e. payroll, human resources, you will want to become familiar with the plan document and make sure the functions that you are responsible for are in compliance with the plan document.
If the named fiduciary lacks expertise in a certain area, such as investments, then the fiduciary should engage a professional with knowledge to carry out that function, an outside service provider. If an outside service provider is engaged to perform a particular function for the plan, the fiduciary should have a process of monitoring that service provider.
When monitoring service providers, actions to ensure they are performing the agreed-upon services include:
- • Evaluating any notices received from the service provider about possible changes to their compensation and the other information they provided when hired;
- • Reviewing the service providers’ performance;
- • Reading any reports they provide (including quarterly and annual reports and information included in the auditor’s packet);
- • Checking actual fees charged;
- • Asking about policies and practices; and
- • Following up on participant complaints.
If you have any questions regarding your Employer Plan, fiduciary responsibilities or requirements for an audit of your Plan, we encourage you to contact us.