Retirement Plan Fiduciaries Responsibilities

At a glance

• The main takeaway: To avoid risk and comply with ERISA standards, plan sponsors should stay abreast of their fiduciary duties for the pension and profit-sharing plans they serve.
• Impact on your business: Plan fiduciaries must adhere to several best practices, including maintaining investment committee minutes, providing participant education, appointing functional fiduciaries and benchmarking fees.
• Next steps: Aprio’s Retirement Plan Services team can help plan sponsors better understand their fiduciary duties to help ensure participants are receiving service that is in line with their best interests.

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The full story:

With the end of the year approaching, now is the perfect time for plan sponsors to get a refresh on duties they must perform as fiduciaries of their pension and profit-sharing plans.

Here are some of the key fiduciary responsibilities that sponsors should fulfill.

A quick recap: what it means to be a fiduciary

Under the Employee Retirement Income Security Act of 1974 (ERISA), retirement-plan fiduciaries are required to act in participants’ best interests at all times. Fiduciaries may be held personally liable for not meeting ERISA standards. It is imperative that plan fiduciaries establish best-practice governance standards to fulfill their fiduciary duties under ERISA.

Here are several best practices to consider:

1. Fiduciary meeting minutes

The plan’s investment committee should be a formal group that meets two to four times a year, monitors the plan’s investment options, evaluates investment performance, and decides the inclusion or elimination of funds from the line-up. Fiduciaries should document these meetings via minutes to verify the committee’s actions and decisions related to policies, procedures, intentions and actions. Creating historical summaries of these decisions is useful, not only as a guide for the committee, but also as evidence in any legal proceedings or IRS examinations. This recommendation includes plans in which investments are self-directed.

2. Investment education

Your fiduciary responsibility includes informing employees about plan availability and usage. Plan sponsors should establish regular investment education for plan participants, covering investment topics such as investment options and how to use the financial institution’s website. Provide investment education at least annually and document it thoroughly. Your documentation should include topics covered and participant attendance. If you need help compiling education for your plan participants, reach out to your financial institution; most of them have resources to help facilitate investment education.

3. Functional fiduciary

Plan fiduciaries include more than just “named” fiduciaries; any “person who exercises discretionary authority or control over plan assets or plan management, renders investment advice for a fee, or has discretionary authority in the administration of the plan, is deemed a fiduciary,” according to ERISA. Your plan’s administrator should determine each person or entity operating in this fiduciary capacity and list them in the fiduciary minutes at least annually. The plan should inform each person on this list of their obligations as a fiduciary to eliminate any questions an advisor might have about their responsibilities.

4. Fees

While ERISA does not specify a permissible level of fees, it is the fiduciary’s responsibility to ensure the plan is paying reasonable, not excessive, fees. Fees include not only the fees charged and billed by administrators, trustees, accountants and attorneys but also asset-based fees. Under a recent ruling from the United States Department of Labor, investment companies and third-party administrators are required to disclose all the various fees, both hidden and direct, paid by the plan. 

As part of your fiduciary meetings, discussion and analysis, it’s important to include comparisons to fees charged by other service providers, which helps ensure that your plan is paying reasonable fees.

If have questions about your fiduciary responsibilities and would like to discuss this information further, please don’t hesitate to contact Aprio’s Retirement Plan Services team. Click here to schedule a consultation.