Fiduciary Responsibility For Plan Sponsors
What plan sponsors need to know
Fiduciaries have legal and ethical duties
The best interest of participants is the true north for fiduciary decisions
Fiduciaries can be held personally liable for breaches
A Prudent Selection Process
Selecting the right qualified default investment alternative (QDIA) is an important step in helping to protect plan fiduciaries. Our online analytical tool helps you align your decisions with the needs of each plan’s participant population, an important element of the Department of Labor’s guidelines.
Fiduciary responsibility carries both legal and ethical duties. For qualified retirement plans, they are bound to act exclusively in the best interests of participants—the true north in all decision-making. The risk of not fulfilling these duties comes at a high price. Fiduciaries must:
Act solely in the interest of plan participants and their beneficiaries, with the exclusive purpose of providing them benefits
Carry out their duties prudently
Follow the plan documents (unless inconsistent with ERISA)
Diversify plan investments
Pay only reasonable plan expenses. Paying “only reasonable plan expenses” does not equate to paying “the lowest-cost” in services and investment management.
Is Cheapest the Best?
Fees are often debated when choosing plan investments. Fiduciaries should evaluate the appropriateness of fees, share classes and product vehicles (i.e. mutual funds, collective investment trusts or separate accounts) against the services received or judgment criteria.
More About Liability Risk—It’s Personal
Fiduciaries can be held personally liable to make good on any losses…resulting from their breach in fiduciary duties, and the penalties can be high:
Willful violations carry personal criminal penalties of up to $100,000 for individual fiduciaries and ($500,000 for corporations) and up to 10 years in prison
Fiduciaries may be liable for losses resulting from participants’ imprudent investment options if the requirements of ERISA Section 404(c) are not satisfied
Fiduciaries may be liable for a breach committed by another fiduciary
If they knowingly participate in, or attempt to conceal, an act or omission by another fiduciary and know that it’s a breach
By failure to fulfill their responsibilities, enables another fiduciary to commit a breach
Has knowledge of a breach by another fiduciary (unless he or she makes reasonable efforts to remedy the breach)
Speak with one of our DC experts.
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.