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Fiduciary Wellness 06/11/13 - 5 things you should be, and 5 things you shouldn't be doing!


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ERISA fiduciaries often don't know what is expected of them - and some don't even know what it means to be a fiduciary, and even if they are one. This presentation walks through some basics of being an ERISA fiduciary, and then describes 5 things you should be doing as a fiduciary (but probably aren't) and 5 things you really shouldn't be doing (and hopefully aren't!).

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Fiduciary Wellness 06/11/13 - 5 things you should be, and 5 things you shouldn't be doing!

  1. 1. June 11, 2013HOSTED BY:
  2. 2. SpeakersMichael Olah, J.D., LL.MDirector,Technical and Legal ComplianceTegrit Group 13680 Cleveland Avenue Uniontown, OH 44685(p) 330.983.0565 | (f) 330.644.2705 | michael.olah@tegritgroup.comMichelle Buckley, CPA, AIFA®Vice President, Practice Leader Benefit Plan GroupMeaden & Moore 1100 Superior Avenue, Suite 1100 Cleveland, Ohio 44114(p) 216-928-5379 | (f) 216-771-4511 |
  3. 3. Program overview• Overview of a fiduciary• Five things you should be doing• Five things you may not be doing• Five things you shouldn’t be doing• Questions?
  4. 4. Fiduciary OverviewERISA created a regulatory scheme thatsplit responsibilities among:•IRS is responsible for the ―qualificationrules‖ which provide the tax benefits ofsponsoring/participating•The DOL is responsible for labor andfiduciary matters, including:Prohibiting certain individuals from holding certain planrelated positions;Prohibiting willful violations of ERISA’s reporting anddisclosure rules;Protecting against coercion of employees to not exerciseERISA protected rights (or retaliating against those whodo); and,Prosecuting the misuse of benefit assets
  5. 5. Fiduciary OverviewIn 2012 the Department of Labor under ERISA:• Recovered $1.27 billion for ERISA plans with respectto prohibited transactions and other ERISAviolations committed with respect to ERISA planassets• Closed 3,566 civil investigations with over 72.1%resulting in monetary recoveries or other correctiveactions• Closed 318 criminal investigations with 78 guiltypleas or convictions and 117 individuals indicted• Responded to 239,520 informal complaint inquiriesresulting in the restoration of $260.7 million inmonetary benefits to plan participants
  6. 6. Fiduciary OverviewFiduciaries are defined by function – notposition• i.e. – do the deed, better pay heed as afiduciary• The ―deeds‖ that make you a fiduciary fallinto three categories – as defined in ERISA• Exercise discretion in the management of theplan or exercises control over plan assets –– Making discretionary day to day decisions thatimpact the operation of the plan (such as who iseligible to participate, to take a loan, hardship orother distributions) or– Having meaningful control over plan assets (such asmoving funds around, authorizing payments tovendors, signing off on distributions and the like)
  7. 7. Fiduciary OverviewThe ―deeds‖ that make you a fiduciaryfall into three categories – as definedin ERISA• Provide ―investment advice‖ with respectto plan assets– Provides investment recommendations– On a regular basis– Pursuant to a mutual agreement orunderstanding– That the advice will serve as a primary basisfor plan investment decisions, and– The advice is ―personalized‖ based on theparticular needs of the plan
  8. 8. Fiduciary OverviewThe ―deeds‖ that make you a fiduciaryfall into three categories – as definedin ERISA• Exercising discretionary authority overthe administration of the plan, including:– Determining which vendors will provideservices to the plan – such as:» Recordkeepers and bundled serviceproviders» investment managers and advisors whowill function as fiduciaries with respectto the plan– Selecting investment providers and theinvestment options within the plan
  9. 9. Fiduciary OverviewRoles of the employer/Plan Sponsor• Settlor/Employer – a ―Non-fiduciary‖ roleexclusively responsible for:• Plan design – including determining the type ofplan to be offered, those eligible to participate,and what benefits will be offered• Choosing amendments altering the above, orterminating the plan entirely• Plan Administrator – a fiduciary roleresponsible for all aspects of planoperation consistent with it’s design –including:• Selecting various service providers/vendors• Selecting others who will perform fiduciaryfunctions on behalf of the plan –
  10. 10. Fiduciary OverviewObligations of fiduciaries:• Use the plan/assets for the exclusivepurpose of providing benefits toparticipants/beneficiaries• Allows payment of ―reasonable‖ fees• Exercise case as a ―prudent expert‖would (using prudent processes)• Diversifying plan assets• Abiding by the terms of the plandocument
  11. 11. Fiduciary OverviewRole of a Committee• Provides structure around fiduciarydecision making (―prudent process‖)• May have responsibilities relating to:• Investment selection and monitoring• Non-investment fiduciary decisions• Plan design (settlor) decisions• Membership should reflect thepurpose of the committee
  12. 12. Fiduciary OverviewFunctions of the Committeeshould be documented• Committee charter spells out therole of the committee and it’sresponsibilities• Provides for selections andreplacement of members• Provides for the level ofdocumentation created andmaintained
  13. 13. Fiduciary OverviewRole of an Investment PolicyStatement (IPS)• Provides structure aroundinvestment decision making• Defines the criteria for• Appropriate investment categories• Investment selection and monitoring• Actions to be taken when investments―fail‖• The IPS is a dynamic workingdocument
  14. 14. Five practices you should be doing1. Utilize an oversight committee• Role• Composition• Delegate responsibility to them2. Annual meetings with Planprovider(s)• Understand provider roles• Are they or are they not a fiduciary
  15. 15. Five practices you should be doing3. Review fiduciary functions• Are duties being performed?• Who are performing the duties?4. Plan documents, processes andprocedures5. Document, document, document
  16. 16. Five practices you may not be doing1. Review of investment policy• Monitor the policy• Updating the policy2. Evaluating fees• New fee regulations—participants• Monitoring of disclosures• New fee regulations-plan sponsors• Disclosures required• Ongoing evaluation
  17. 17. Five practices you may not be doing3.Education of fiduciaries• Conduct Training• Review requirements on an annualbasis• Confirm that they understand theirduties
  18. 18. Five practices you may not be doing4. Review fiduciary functions• Are duties being performed?• Who are performing the duties?5. Plan documents, processes andprocedures
  19. 19. Five practices you shouldn’t bedoing1. Giving advice to participants2. Not engaging ERISA experts3. Assume that third partyproviders are doing everythingthey should be
  20. 20. Five practices you shouldn’t bedoing4. You have all the procedures butno evidence exists that youfollow them (document,document and document!)5. Assume you have noresponsibilities for providing amechanism for retirement
  21. 21. Questions?