To follow your fiduciary duties, you would have to have been educated on what your fiduciary duties are. If you are like many fiduciaries, you have not had any formal education on your fiduciary duties. You figure that your providers know better than you and will educate you as necessary. Unfortunately, selecting a provider is a fiduciary act itself. Some providers may perceive an uneducated fiduciary as a benefit to themselves.
The Department of Labor has created a publication called “Meeting Your Fiduciary Responsibilities.” If you haven’t read it I recommend you either Google it or contact us to receive a copy. Many a provider has been selected based on a good business reason and not a fiduciary one. This may have you involved in conflicts of interest which violate your duty.
Fiduciary duties and retirement plans
Step one of following the fiduciary duty of prudence is to know the laws and roles. This is according to the Center for Fiduciary Studies and the Global Fiduciary Precepts or standards of conduct they have outlined:
- Loyalty: act solely in the best interest of the participant at all times
- Adherence: carry out duties in accordance with the governing retirement plan documents & all applicable laws
- Prudence: discharge duties with care, diligence, and sound judgment
- Exclusive purpose: act for the exclusive purpose of providing benefits to participants
Noted ERISA Attorney Fred Reish cites some additional ones:
The Duty to Prudently Monitor: When hiring a service provider, a fiduciary is responsible for making a prudent evaluation of the provider and the reasonableness of the fees being charged for the service to be performed. In addition, the fiduciary is responsible for prudently monitoring the activities and reviewing the performance of the provider. Finally, fiduciaries need to review and evaluate the results produced by the provider’s services. Are your participants retirement ready?
The Duty to Investigate: Fiduciaries must conduct a thorough investigation and make decisions based on the information they have gathered. In this regard, ERISA requires fiduciaries to use a prudent process.
The Duty to Know What Products and Services are Available in the Market Place: In conducting searches for providers of services and investments, and assessing the reasonableness of plan fees and expenses, fiduciaries have an obligation to know what products and services are available. Do you know about ERISA 3(21) investment advisor, ERISA 3(38) investment managers, and ERISA 3(16) administrators?
The Duty To Use Outside Sources: Fiduciaries are not expected to be experts. They may reasonably rely on the assistance of others in performing the required investigation and data gathering process. One of the key issues in determining whether reliance on the expert is reasonable is whether the expert is independent and unbiased. Are your providers unbiased?
The Duty to Monitor Utilization of The Plan Services: In addition to the general obligation to monitor the performance of service providers, fiduciaries must also monitor utilization of services, to determine whether they are reasonably designed and operated to reflect the goals of the plan.
Assessing Your Fiduciary Duties
We have assessment tools to help you evaluate where you stand relative to your fiduciary duties. We would like to provide you the Center for Fiduciary Studies, FI 360, and Self-Assessment of Fiduciary Excellence. It has 22 areas major topic areas, with further subtopics to help provide a firm foundation for fiduciary excellence.
If you prefer, we would be happy to provide a consultation and a free assessment. Many people who feel perfectly healthy find after a routine checkup that they may have high blood pressure or some other issue that typically goes undetected until there’s a crisis. An audit of your retirement plan by regulator or worse yet, a class-action attorneys can be such an event that could have been avoided by having the checkup by an independent unbiased, impartial Accredited Investment Fiduciary®.
(1) The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
(2) This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.
