How can we define the importance of your role as a fiduciary and the responsibility you have as an employer to act in the best interest of your employees?
I’m sure you’ve heard of ERISA, which stands for the Employee Retirement Income Security Act of 1974. It’s a federal law that sets minimum standards for retirement plans in private industry. Fiduciaries have important responsibilities and are subject to certain standards of conduct because they act on behalf of participants in the plan.
These responsibilities are vast, but they include primarily acting solely in the interest of the plan participants and their beneficiaries with the exclusive purpose of providing benefits to them, carrying out fiduciary duties with skill, prudence, and diligence, following the plan documents, diversifying the plan investments and paying only reasonable expenses for administering the plan and its assets, and, of course, avoiding conflicts of interest.
You’re likely a fiduciary if you’re using your own discretion and judgment in managing the plan or controlling the plan assets in any way. Fiduciary status is actually based on functions that the person performs for the plan—not just the title.
What does this mean for you and your organization? Why should you be concerned?
As a fiduciary, you can face personal liability. In my opinion, the best way to protect yourself is by having a repeatable process to monitor the plan investments, hire and fire managers, and, if they’re not performing to certain standards, taking action.
You should also make sure all the fees paid to the plan’s service providers are reasonable. The best way to accomplish this is to perform periodic vendor benchmarking, and it’s advisable to do a full request for proposal every three to five years.
By partnering with expert service providers, they can help you meet your goals as a fiduciary. However, you should also know that there are now solutions available that allow you to outsource virtually all of these responsibilities. To learn more, you can visit selectretirementplans.com.
To learn more about fiduciary roles, their definitions, or how to manage vendor due diligence, don’t hesitate to message me at retirementfco.com or give me a call.
In the meantime, stay tuned for my next video where I’ll talk about diversifying the investment lineup in your retirement plan and how offering fewer investment choices can help your employees take action.