Studies have shown that having access to a retirement plan at work is a crucial factor in whether American workers are financially prepared for retirement. But this good deed does not come without responsibility. The Employee Retirement Income Security Act of 1974 (ERISA) imposes important obligations and high standards of conduct on those who establish and manage a retirement plan, like a 401(k) plan. These rules are designed to ensure that individuals with authority to manage retirement plans and plan assets act in the best interests of plan participants (and their beneficiaries) and handle plan assets properly.
As an ERISA fiduciary, employers must:
- Act solely in the best interests of plan participants
- Carry out their duties prudently
- Diversify plan investments
- Follow the terms of the plan document
- Ensure that only reasonable expenses are paid from the plan
No doubt you are committed to meeting your fiduciary obligations, but if you’re like most employers, you’re not sure where to start. Many employers don’t understand how these standards apply to their everyday management tasks, nor how to prove they are satisfying all of their responsibilities. Yet, the increased scrutiny by the Department of Labor (DOL) and the risk of fiduciary breach complaints by plan participants is strong motivation for employers to learn more about their fiduciary role.
Financial advisors can provide education on what it means to be a plan fiduciary and valuable support for fiduciary tasks such as benchmarking investments, analyzing plan fees, reviewing plan documents, and making certain the appropriate fidelity bond is in place.
You may also want to educate yourself and others on your staff about the fiduciary responsibilities under ERISA by reviewing the fiduciary education developed by the DOL. These free tools can help you understand what it means to be an ERISA fiduciary and how you can follow prudent plan governance practices to demonstrate that you are meeting your fiduciary responsibilities.
DOL Educational Resources
Meeting Your Fiduciary Responsibilities
Publication
This 14-page publication provides an overview of the basic fiduciary rules applicable to retirement plans under ERISA. It includes easy-to-understand explanations of the significance of being a fiduciary, the regulatory requirements, and tips to help employers meet their fiduciary responsibilities.
The publication can be found here
Understanding Fees and Expenses
Publication
Employers have a fiduciary responsibility to ensure that the services provided to their plan are necessary and that the cost of those services is reasonable. This 12-page publication is designed to help employers better understand the fees charged to the plan including investment-related fees and fees paid for plan services such as recordkeeping, as well as how these fees are paid.
The publication can be found here
Getting it Right – Know your Fiduciary Responsibilities
Webcast
This pre-recorded series of webcasts explains the basic fiduciary responsibilities when operating a retirement or health benefit plan for small and medium-sized employers. Days 1 and 2 include fiduciary responsibilities, prohibited transactions, reporting and disclosure requirements, and the DOL’s voluntary correction programs for retirement plans. Day 3 applies to employer-sponsored group health plans. Register for 1, 2, or all 3 webcasts.
The webcasts can be found here
eLaws ERISA Fiduciary Advisor
Online tool
The ERISA Fiduciary Advisor online tool leads employers through a series of questions to help them understand their how their fiduciary responsibilities apply to plan management and provides links to more detailed information on key topics.
Tips for Selecting and Monitoring Service Providers for Your Employee Benefit Plan
Publication
Employers typically engage a team of service providers to help with the day-to-day responsibilities of operating a plan, including a third-party administrator, a recordkeeper, and an investment professional. To help employers evaluate whether the services provided to the plan are necessary and the cost is reasonable, the DOL has created a list of issues plan sponsors should consider when selecting and monitoring service providers.