Your Fiduciary Responsibilities Defined and Made Easy

Sponsoring a retirement plan can make you a fiduciary to your organization’s retirement plan! What surprises many plan administrators is that an employee’s function over title can also make them a fiduciary. But do you know what that actually means? Do you know what your fiduciary responsibilities are and how to fulfill them?

Most plan sponsors only have a basic understanding of their fiduciary responsibilities and only vaguely understand what they entail. To make it easy for you, I’ve broken it down into five basic actions. These are your fiduciary responsibilities:

Do The Right Thing

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. Perhaps another way to consider this requirement, when making decisions regarding the plan, is to think about plan assets as if they were your personal investments. In such a situation, you will undoubtedly make decisions that have your best interest in mind above all else.

It is important to avoid conflicts of interest where it may appear that your actions are to benefit someone other than the plan participants or beneficiaries. Transactions on behalf of the plan should not benefit yourself, other fiduciaries, service providers, or the plan sponsor. If they do benefit another, you will need to have written proof that it is the best course of action for the plan participants and beneficiaries.

Make Informed Decisions

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.

Inevitably, in administering your plan, you will delegate some of those responsibilities, such as hiring a service provider, whether it’s a third party administrator, recordkeeper, or advisor. It is important to review a number of different options and compare their fees and the services they provide. You should fully document the entire evaluation process to show that you acted prudently and in the best interest of your plan’s participants and beneficiaries. Once hired, be sure to periodically review both their performance and fees in relation to the value you are receiving.

Build A Plan That Provides Value

There are two sides to driving value from your plan, what you give and what you receive. What you give are the fees associated with your plan. You need to make sure that they are reasonable and are periodically benchmarked or compared to the open market.

What you receive has to do with the services you purchase on behalf of the plan. The services provided to you by third parties should be necessary for your plan needs. Consider what the plan needs and whether you or your staff can adequately provide those services. If not, it is incumbent upon you to procure those necessary services.

Give Choices

It is a requirement to provide your plan participants with a variety of investment options. Once chosen, they need to be monitored regularly for performance and replaced when necessary.

Follow the Plan (…and the Law)

It sounds simple enough, but it isn’t as easy as it sounds. There are a ton of details in a retirement plan. As time goes by, it is easy to overlook (or forget) details. A good example that happens frequently is that we make changes to the plan, file the amendments and then miss taking it over the goal line by not updating internal processes to memorialize the change as part of our standard operating procedures!

Let’s also not forget that you have to continually discern whether the plan is in line with the law. If not, you must scrap the affected plan provisions and operate the plan with what does comply with current law.

Finally, staying in compliance when it comes to the Employee Retirement Income Security Act (ERISA), what governs retirement plans, can get pretty darn complicated. You must file numerous required forms, make annual disclosures, avoid making prohibited transactions,  make contributions within specific timeframes, make changes to your plan according to precise guidelines as well as a plethora of other requirements. In addition to ERISA, you also have to maintain compliance with the Internal Revenue Code which is compounded with changes in the laws and changes made to the plan itself.

How We Can Help

Although I’ve simplified your fiduciary requirements here, they are fairly intricate. The old saying “the devil's in the details” certainly applies here! Each one has many facets and specific requirements. That’s why a lot of plan sponsors choose to seek professional help. This really results in two important outcomes for you as a plan fiduciary:

  1. You can reduce your fiduciary liability and share it with a specialist
  2. You can focus on what you do best – running your business!

At Stonebridge Financial Group, retirement plans are what we do. We help you design and implement highly effective retirement plans. From  investment performance maximization to minimizing plan sponsor fiduciary liability to simplifying compliance, we are retirement plan advisors that help make your life way easier. If you would like to learn more about your fiduciary responsibilities or how we can help you fulfill them, schedule a free 15-minute introductory phone call or email [email protected] today.

About Bob

Bob Herdoiza started his career as a CPA auditing retirement plans and is a Partner at Stonebridge Financial Group, a registered investment advisory firm. Stonebridge seeks to help clients build and manage highly effective, successful retirement plans. Bob also served as President of CEBOS for more than 15 years before joining Stonebridge Financial Group. He takes pride in his firm’s 98% client satisfaction rate and individualized implementation approach. Learn more by connecting with Bob on LinkedIn or visiting www.stonebridgefinancialgroup.com.