With many calendar year-end benefit plans just being recently filed with the Department of Labor, now is a perfect time to examine if management is truly upholding their fiduciary duties over the Plan.  Remember, it is always the fiduciary’s primary objective to run their plan solely in the interest of participants. Plan administrators can learn from the mistakes of those who have fallen short on those duties and follow these best practices:

  • Establish a governance structure with clearly designated responsibilities.  Create a charter defining powers, duties, and methods of operation.  Be sure the governance body is free from any conflicts of interest.
  • Understand the plan’s investments.  Provide a diversified set of options without creating “choice overload” for participants (10-20 investment choices is recommended).    Monitor under-performing funds on a periodic basis (i.e. quarterly) and seek alternative replacements when the time is necessary.
  • Ensure the plan only pays reasonable fees.  Understand the amount of fees actually paid, how fees are generated, who pays the fees, and continually monitor the fairness of the fees.

In conclusion, plan administrators should always remember to memorialize all fiduciary thought processes and key decisions made over their Plan.  Ensure the expertise of committee members is appropriate.  Retain minutes from meetings of committees and maintain an investment file to retain material from reviews of investments.   Examples of items to include in meeting minutes include the following:

  • Date, time and location of the meeting
  • Identification of the people present at the meeting
  • Reference to any investment reports used during the meeting
  • Participation issues such as education, goals for increasing the number of participants, or deferral rates
  • Plan fee discussions/issues
  • Fund performance issues and selection of investment options
  • Decisions made, such as the decision to place a specific fund on formal or informal “watch list” that will need to be addressed at a future meeting
  • Decisions made which require immediate action, such as the decision to remove and/or replace a fund in the Plan’s line-up
  • Evaluation of service providers
  • Employee complaints or concerns, if known
  • Compliance with ERISA regulations

Ultimately, if the process is not documented, it did not happen.  Minutes are the plan administrator’s opportunity to demonstrate how they fulfilled their fiduciary duties and mitigate the risk of liability.

Kevin Testo is a partner based out of our Albany, NY office.

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.


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