One expert thinks that will change, predicting fiduciary training will be a federal mandate, “…lawmakers here and outside the United States will eventually impose universal certification requirements for retirement plan fiduciaries.”
Some of the very basic questions raised include:
- How should in-house fiduciaries be selected?
- How should in-house fiduciaries (individually and as a group) be assessed in terms of demonstrating procedural prudence?
- Should in-house fiduciaries receive a bonus for achieving certain plan-specific goals?
- Does everyone on an investment committee need to be equally proficient in a particular subject area or should someone serve as a Sarbanes-Oxley type of “financial expert?”
- Do in-house fiduciary term limits make sense?
- How do variables such as plan design and characteristics of the workforce impact the kind of fiduciary education needed?
- How should training differ for small to medium sized plans as addressed by the “Report of the Working Group on Fiduciary Education and Training?”
The world for corporate boards changed after Enron with the passage of Sarbanes Oxley putting more liability on these boards for misdeeds by management leading to a spat of training programs. Though the newly promulgated DOL conflict of interest rule puts broker dealers and insurance networks on the hook for their actions of their registered representatives, it also raises the stakes for plan sponsors relying on these professionals to help their company and employees manage their retirement plans.
Companies would never put people in charge of their defined benefit (DB) plan without proper experience and training so why don’t they follow suit with their DC plan? It seems to be stating the obvious questioning the validity of mandatory fiduciary training, yet it does not exist.
The answer is that senior management thinks that because they have off-loaded the financial risk of an underfunded retirement to employees, they do not need to spend the resources to train people to run their DC plan. Market forces may change all that as companies come to grips with the financial realities of employing workers at their highest salary level and lowest productivity while spending more on healthcare and other benefits. But nothing will move the market like a government imposed mandate on training of plan fiduciaries running their company’s DC plan which may be coming soon.
