Fiduciary Education for active retirement plan trustees is in short supply. But, if plan sponsors will take the time, they will quickly learn that the court delivers Fiduciary Education in unconventional ways. It is no longer surprising to see the Department of Labor step-up upon uncovering sloppy fiduciary work. That was just the case recently when a DOL investigation by the department’s Employee Benefits Security Administration discovered a history of fiduciary practices the department felt were inappropriate. After the findings by the Department of Labor, City National repeatedly refused to voluntarily correct its ERISA violations and return money owed to the plan.
The intersection of the DOL and the U.S Federal Court
In 2015, the Department of Labor filed suit against a defendant that should have known better. In a recent ruling (earlier this month) the U.S. Federal court found that City National Corp. engaged in self-dealing in its 401(k) profit-sharing plan. The Judge explained that bank officials, as plan fiduciaries, violated ERISA by failing to properly monitor plan related fees and services.
What Does Unconventional Education Look Like?
Earlier in April, the court ordered City National to retain an independent, third-party fiduciary. This was a loud-and-clear message, sent directly to a team that should have understood the ERISA requirements of overseeing a tax-qualified plan. The court is requiring that the independent fiduciary take an active role in reviewing all compensation for the plan from 2006 through 2012. The court also wants identified and restored any lost opportunity costs. This alone should carry an education for all plan fiduciaries; however, the court delivers fiduciary education in another form as well by finding that the plan sponsor failed to meet its fiduciary duties when City National:
- Accepted fees from the plan without any review or independent investigation into whether fees were reasonable;
- Did not reimburse the plan upon discovery that fees charged were unreasonably high fees;
- Did not track direct expenses for the plan; and
- Failed to act prudently and only in the interest of the plan and its participants.
When reviewing the actions listed above it is simple to comprehend the court delivers fiduciary education to anyone who will take the time to read and become educated.
