Evaluating Sponsor Fiduciary Responsibilities
“Fiduciary Responsibility” has been getting a lot of attention in the press, which emphasizes the need for plan sponsors to periodically re-evaluate their responsibilities, as set forth by the Employee Retirement Income Security Act (ERISA). Some questions for consideration by the plan sponsor include the following:
- Has plan management adequately identified those who would be considered fiduciaries to the plan both inside the organization and outside (e.g., third parties)? Do these individuals within the organization know who they are and what their responsibilities entail? Do new fiduciaries to the plan receive adequate training? One resource is the Meeting Your Fiduciary Responsibilities guide, which is provided by the DOL. For an e-copy, go to http://www.dol.gov/ebsa/publications/fiduciaryresponsibility.html.
- How does plan management maintain proper oversight of the plan and its operations? For instance, is there a regular meeting by a plan oversight board? Does the board maintain minutes and ensure completion of key tasks determined and/or assigned by the board?
- How does plan management monitor the plan’s investments and fees? Fees charged to the plan and participants as well as the investment options from which participants may select are two of the top fiduciary issues in the EBP industry.
- Does plan management utilize an investment adviser? Are the adviser’s recommendations carefully considered by those charged with oversight of the plan and any decisions documented carefully? Is there a current investment policy statement adhered to by both the investment manager and plan management? Would plan management’s processes and decisions in the areas of fees and investments stand up under scrutiny, such as from a DOL/IRS audit or a participant lawsuit?
- When there are issues with the plan’s operations, has plan management used competent legal counsel specialized in ERISA matters, as needed? Are plan operational issues corrected timely and appropriately? Mistakes happen with even the best-run plans so having an appropriate process in place to address plan errors (and prevent reoccurrences) is essential.