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The Importance of a Fiduciary Audit File: ERISA Obligation

The Importance of a Fiduciary Audit File: ERISA Obligation. Fulfilling fiduciary obligations under ERISA for defined contribution plans can seem overwhelming but there are simple steps that can be taken to prepare for an audit and keep the plan in compliance. A plan sponsor attending a TPSU program held at Notre Dame discusses how her advisor helps her to maintain a fiduciary audit file.

The plan’s advisor recommended that the company keep a fiduciary audit file along with form an investment committee which conducts quarterly meetings dating back eight years. The audit file contains:

  • Committee minutes
  • Funds reviews
  • Review of plan fees

Though the plan has not been audited by the DOL, the company would be ready to almost immediately turn over the  fiduciary audit file and plan documents. The plan sponsor also occasionally refers to the file when needed. Though the advisor keeps a copy, the company retains their own in case of turnover.

A red flag for the DOL when auditing a plan is significant delay when requesting simple documents like investment and fee reviews. By keeping an audit file, these requests can be satisfied quickly which may give DOL auditors more confidence that the DC plan is being run prudently. Though investment committees and investment policy statements (IPSs) are not required, both are another good sign of a prudently run plan.

With the help of an experienced and knowledgeable plan advisor, keeping a plan in compliance and conducting best practices is not hard. If you don’t have an investment committee or IPS or the committee does not meet regularly or the IPS is not updated periodically, when the DOL comes calling, which is expected to be more often in the future, answering their questions and requests can be unnecessarily difficult, time consuming and uncomfortable. Keeping a current fiduciary file is not only prudent – it makes common sense.

Fred Barstein

Fred Barstein

Founder & Editor-in-Chief at 401kTV | TRAU | TPSU
Fred Barstein is the Founder & Editor-in-Chief of 401kTV. Fred is also the Founder and CEO of The Retirement Advisor University (TRAU), a collaboration with UCLA Anderson School of Management Executive Education and The Plan Sponsor University (TPSU).Mr. Barstein was also Founder and Editor-in-Chief of NAPA Net.
Fred Barstein

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