Companies continue to expand their benefits offerings—in particular, retirement savings plans—to remain competitive and recruit and retain top talent. As such, employers need to have a solid understanding of retirement plan basics, including their fiduciary duties.
A recent BenefitsPro article highlighted a webinar hosted by the American Society of Pension Professionals and Actuaries (ASPPA) titled “Fiduciaries: Who Are They?” Led by Lyndsey Barnett, an attorney with Bricker Graydon, the webinar focused on the basics of fiduciaries and their various roles within employer-based retirement plans. Ms. Barnett emphasized that fiduciary roles are not one-size-fits-all and that there are many different hats fiduciaries may wear. She also emphasized the need for retirement plan sponsors to stay up to date on fiduciary regulations, which have changed dramatically and been subjected to closer scrutiny in recent years.
Ms. Barnett explains that under ERISA (the Employee Retirement Income Security Act), a fiduciary includes anyone with discretionary authority or control over retirement plan management or plan assets. These individuals may include trustees, investment managers, advisors, and in some cases, even company owners. She also mentioned the growing popularity of 3(16) administrator services, but noted that many companies still rely on employer or committee structures for plan administration. Ms. Barnett also pointed out that even if plan sponsors elect to outsource to a third party fiduciary service provider, they still don’t completely abdicate all of their fiduciary responsibilities.
During the webinar, Ms. Barnett also outlined the five-part fiduciary rule, which determines who serves as a fiduciary based on factors such as making investment recommendations, regularity of advice, mutual agreements, and individualized advice.
Further, she discussed fiduciary responsibilities, including loyalty to plan participants, prudence in plan management, diversification, and adherence to plan documents within ERISA rules. She also addressed potential fiduciary liability issues, emphasizing that breaches of fiduciary duty can lead to legal consequences.
To protect against liability, Ms. Barnett suggested options such as liability insurance, fidelity bonds, and limited indemnification. She also recommended proper training for fiduciaries, along with ensuring that the right individuals with expertise or trainable skills are part of the trustee or committee team. Additionally, she noted, documentation of all actions, including meeting minutes, is crucial.
Finally, Ms. Barnett mentioned voluntary correction policies from the Department of Labor (DOL) that can help address plan issues, albeit through a detailed and lengthy process. In general, the ASPPA webinar is a good reminder of the importance of ensuring that fiduciaries are well-prepared and that companies follow proper procedures to minimize risks and protect both fiduciaries and retirement plan participants against unintended consequences.
