New Year’s Resolutions for Plan Fiduciaries

January 2, 2013

Authored by: benefitsbclp

It is that time of the year again for making those New Year’s resolutions – spending more time with family and friends, exercising more, losing weight, quitting smoking, and becoming a better plan fiduciary.  Here are our top ten New Year’s resolutions for plan fiduciaries for 2013:

  1. Obtain/review fiduciary liability insurance policies.  Fiduciary liability insurance generally covers liability or loss resulting from the fiduciary’s acts or omissions and is a fiduciary’s “first line of defense.”  Policies should be reviewed to ensure adequate coverage and protection in scope and amount.
  2. Practice procedural prudence.  Being a good fiduciary is all about having a procedural prudent process.  For each fiduciary decision you should:  inquire, analyze, consider alternatives, get help and advice if needed, and document the process, actions and basis for the decision.
  3. Hold regular plan fiduciary/committee meetings.  Plan fiduciaries should meet periodically (we recommend at least quarterly) to consider information regarding plan investment performance, selection, and oversight of plan investments, investment managers, service providers, and other plan administrative matters.  Minutes of the meetings should be kept to help demonstrate that the fiduciaries have engaged in a prudent process of analyzing and assessing relevant issues.
  4. Review, and if necessary revise, your plan’s investment policy statement.  The investment policy statement should establish guidelines and procedures for selecting, monitoring, and removing investment funds and manager.  Plan fiduciaries must monitor the statement and keep it current to ensure investment decisions are made in a rational manner and to further the purpose of the plan and its funding policy.
  5. Monitor performance of investment funds and investment managers.  Fiduciaries should monitor plan investments and investment managers on an ongoing basis to ensure that they are meeting the criteria set forth in the investment policy statement.  Fiduciaries should follow the statement in selection, monitoring and removal of investment funds and managers.
  6. Review and monitor plan expenses and fees.  With the new DOL regulations on fee disclosure, fiduciaries must make sure all required fee disclosures are made timely and monitor fees on a regular basis.  Fiduciaries should establish a policy for ongoing plan expense and fee monitoring and benchmarking.
  7. Consider an audit to ensure compliance with the ERISA 404(c) and qualified default investment alternative (QDIA) requirements.  ERISA Section 404(c) provides limited protection to fiduciaries of participant-directed individual account plans from fiduciary liability for participants’ investment losses; provided that the plan complies with the requirements described  in 404(c).
  8. Conduct a compliance review of your plan documents.  Since fiduciaries should make decisions by following the applicable plan documents (e.g., plan, summary plan descriptions, investment policy, trust, committee charters, delegations, etc.), fiduciaries should make sure plan documents are consistent with each other and with actual practice.
  9. Consider hiring professionals and other service providers to help perform certain fiduciary tasks.  Keep in mind that fiduciaries still have the duty to monitor plan service providers, including making sure their fees are reasonable if their fees are paid by the plan.
  10. Provide fiduciary education and training to plan fiduciaries.  “The single most important role a plan sponsor serves is being a fiduciary.  With increased complexity in plan design, communications, and investment selection, a fiduciary’s job is becoming increasingly challenging,” said David Wray, President of the Profit Sharing/401k Council of America (PSCA).  These challenges, coupled with the fact that any ERISA fiduciary who fails to comply with the applicable standard of conduct may be held personally liable for any plan losses resulting from their breach, make it vital that all ERISA fiduciaries receive periodic training.  The simple act of providing fiduciary training to your organization’s ERISA fiduciaries will help establish a record of “procedural prudence” and is the major step to minimizing fiduciary liability.  Bryan Cave’s Employee Benefits & Executive Compensation Group has carefully developed comprehensive fiduciary training programs, which can be easily customized for any group of plan fiduciaries.

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