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As an employee benefit plan sponsor, your job seems never ending with the numerous Department of Labor (DOL) rules and regulations concerning a plan fiduciary. If you take an organized, methodical approach, you can satisfy your fiduciary obligations without it becoming an unduly onerous process. An added plus is that the more methodical you are, the more evidence you’ll have to show that you’ve met your fiduciary duties, should it ever be challenged.
Fiduciary roles and actions are distinct from “settlor” functions. For starters, the Employee Retirement Income Security Act of 1974 (ERISA) defines and regulates fiduciary duties, while state law generally governs settlor functions.
Settlor functions essentially pertain to making business decisions regarding the plan’s design, including amending or terminating it. For example, a settlor can design a plan to cover a particular set of employees without incurring fiduciary responsibility. In contrast, fiduciary roles pertain to substantive actions to implement business decisions, like determining if a particular employee is ineligible to participate in the plan. Also, a fiduciary is required to act solely in the interest of plan participants. It is important to remember that the fiduciary status is based on functions performed for the plan, not just the person’s title.
As a plan fiduciary, how can you be sure to follow proper procedures regarding overall plan administration? Remember, repeated or serious acts of noncompliance (including prohibited transactions) may be a violation of your fiduciary duties. To start, maintain a comprehensive regulatory filing checklist to ensure that you file or issue to participants all required documents such as the Summary Plan Description, Summary Annual Report and investment related information. Additional steps you should take include:
Careful oversight of retirement plan investments is a fiduciary function and includes the selection and suitability of investment choices, as well as assessing their performance against relevant benchmarks. Since this requires a certain level of expertise, a plan sponsor typically hires an investment manager, such as a bank, insurance company or registered investment advisor, to also act as a fiduciary in this arena.
While some investment managers may insist they aren’t fiduciaries, under ERISA, a person is a plan fiduciary to the extent the person renders investment advice for a fee or other compensation, directly or indirectly, with respect to any money or other property of an ERISA plan, or has any authority or responsibility to do so.In addition, DOL regulations state that a person is a plan fiduciary if that person recommends investing in, purchasing or selling securities; regularly renders investment advice, knowing that it serves as the primary basis for investment decisions; or customizes advice to address the plan’s particular needs. If you have an investment manager, your fiduciary duties should include:
Retirement plans have many moving parts. By carefully reviewing your fiduciary duties as they relate to your plan’s operations, you’ll meet your fiduciary obligations. If you have any questions about ERISA’s fiduciary obligations, contact Doeren Mayhew’s employee benefits specialists.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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