Your Fiduciary Responsibilities Defined and Made Easy

Participating in the administration of your company's retirement plan can make you a fiduciary to the plan. When it comes to fiduciary status, an employee’s function over title is a deciding factor. Suffice it to say, if you exercise discretion over your organization's plan you most likely are a fiduciary!

So what does all this actually mean if I am a fiduciary? To make it easy for you, we’ve broken it down into five basic responsibilities:

1. Operate in the Best Interests of the Plan Participants and Beneficiaries

The most important thing for you to consider as a fiduciary is that you must operate your organization’s retirement plan solely in the best interest of the plan participants and their beneficiaries. Decision and transactions on behalf of the plan should not benefit yourself, other fiduciaries, service providers, or the plan sponsor. Also consider, it will be prudent to document the rationale for your decisions with evidence demonstrating the decision was a reasonable course of action under the particular circumstances.

2. Exercise Prudence

In addition to putting plan participants and beneficiaries first, fiduciary actions must be prudent. This means you must carry out your duties with care, skill, prudence, and diligence, including acquiring enough information to make informed decisions or delegating responsibilities that you are not qualified to fulfill.

As an example, inevitably in administering your plan, you will delegate some of those your responsibilities, such as hiring a service provider, whether it’s a third party administrator, recordkeeper, or advisor. In doing so, it is important to review a number of different options, compare their fees and service level as well as speak with references. This process should be fully documented including the rationale for your decision.

3. Use Plan Assets Only for Paying Benefits and Defraying Reasonable Costs of Administration

The requirement to pay benefits is pretty straight forward. However, defraying reasonable costs of administration does have some gray area and should be reviewed carefully. Generally costs of the plan include: investment fund fees, recordkeeping and third party administration fees, investment advisory fees, and audit fees (for large plans). Stonebridge Financial Group recommends conducting, at a minimum, annual fee benchmarking as well as implementing a request for proposal process that recurs every three to five years.

It is also important to note that if fees are not paid out of plan assets, they are not subject to the Department of Labor's scrutiny.

4. Diversify Plan Investments

The Department of Labor's regulations say that there must be at least three investment options for participants so that participants can diversify investments within an investment category. Most plans have many more than this and generally this is the most common reason a plan hires an investment advisor. Investment advisors will define a formal methodology (i.e., an investment policy statement) for initially selecting and the ongoing monitoring of your investment line up. Each review should be documented including all decisions that are made and why.

5. Follow the Plan (…and the Law)

It sounds simple enough, but the "Devil is in the Details" as the saying goes. There are an inordinate amount of details in a plan document. As time goes by, it is easy to overlook (or forget) details or default to: "That's the way we've always done it" when the way we've always done it may be incorrect. In addition, frequently we see plans where amendments are made throughout the year and then internal processes are not updated to memorialize the change and do not become part of standard operating procedure until there is an issue!

For the next dimension on this one, it is important to review plan provisions at least annually to discern whether the plan does not diverge from current and imminent changes to the law including changes to ERISA, Department of Labor regulations or IRS provisions. These governing entities continually change which make it challenging to stay current, not to mention all the standard requirements that need to be fulfilled on an ongoing plan year basis (e.g., annual disclosures, avoid prohibited transactions, timely contributions, as well as a plethora of other requirements).

How We Can Help

Delegating fiduciary responsibilities can be a great solution for plan sponsors who lack the time and knowledge to manage a retirement plan and choose prudent investments. At Stonebridge Financial Group, this is all we've done since our inception back in 2004! Our robust service offering starts with ERISA 3(21) and 3(38) services and is the tip of the iceberg. We are consultants that help you with every aspect of your plan:

  • Ensuring participant retirement readiness
  • 1:1 and group participant education and retirement readiness meetings
  • Financial wellness
  • Committee fiduciary training
  • Process creation and documentation
  • Plan design
  • Contribution match modeling
  • Annual plan compliance review
  • And so much more

We become your outsourced retirement plan officer who dives into the morass of retirement plan details and resolves issues so you don't have to!

Please click here to schedule a short call, give us a call at (855) 530-0500 x601 or email info@stonebridgefinancialgroup.com. We look forward to helping your committee successfully fulfill their fiduciary duties with ease and excellence!