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What are Your Fiduciary Responsibilities?
- 1. WHAT ARE YOUR FIDUCIARY RESPONSIBILITIES? GAIN CONTROL berrydunn.com
- 2. FIDUCIARY RESPONSIBILITY What does it mean to be a fiduciary? • Act solely in the interest of participants • Act prudently • Follow the plan documents • Diversify plan investments • Pay only reasonable plan expenses GAIN CONTROL
- 3. FIDUCIARY RESPONSIBILITY Who is a fiduciary? • Actions speak louder than words! − Exercises discretionary authority or control − Provides investment advice for a fee − Has discretionary authority or responsibility • Named Fiduciary • Investment Manager • Trustee • Investment advisor • Plan administrator GAIN CONTROL
- 4. FIDUCIARY RESPONSIBILITY Directed Trustee Discretionary Trustee • Most common type of • Exclusive authority and outside trustee discretion over the management and control of • Has custody of plan assets plan assets • No discretionary authority Acts on instructions from a fiduciary with discretionary authority • Lacks requisite authority over plan or its assets GAIN CONTROL
- 5. FIDUCIARY RESPONSIBILITY What are my fiduciary duties? • Duty of Loyalty • Prudence (prudent expert standard) • Diversification • Follow the plan documents • Establish proper procedures GAIN CONTROL
- 6. FIDUCIARY RESPONSIBILITY What are my fiduciary duties? • Select & monitor plan service providers − Are fees reasonable? − How to determine reasonableness? − Hire a consultant − Monitor the industry regarding fee developments − Consult with peer companies − Use a benchmarking service − Conduct a Request for Proposal (RFP) process − Are providers doing what they are hired to do? GAIN CONTROL
- 7. FIDUCIARY RESPONSIBILITY George v. Kraft Food case (7th circuit 2011) • Class action by participants challenging 401(k) plan recordkeeping fees − Same service provider for 13 years without requesting competitive bids − Consultant hired found fees to be comparable and reasonable Court: evidence of prudence but not a complete defense − Take-away: Follow defensible process to determine reasonableness and document such process and decisions GAIN CONTROL
- 8. FIDUCIARY RESPONSIBILITY What are my fiduciary duties? • Select & monitor plan investments − This responsibility cannot be eliminated!!! − How to monitor? − Use an outside consultant? − What is an Investment Policy Statement? − Why use it? − How frequent? − What are benchmarks? − When to make changes? GAIN CONTROL
- 9. FIDUCIARY RESPONSIBILITY Examples of Consequences for Responsibilities Failures • Distribute required notices • Prohibited transaction • File required forms • Personal liability • Deposit EE contributions • Civil/Criminal liability • Amend plan documents • Don’t forget about terminated participants!! GAIN CONTROL
- 10. FIDUCIARY RESPONSIBILITY How to protect a fiduciary? • Corporate Indemnification • Fiduciary liability insurance GAIN CONTROL
- 11. FIDUCIARY RESPONSIBILITY How to limit fiduciary responsibility? • Document, document, document!!! • 404(c) Sufficient information to make informed decisions • Qualified Default Investment Alternative (QDIA) • Automatic IRA Rollover GAIN CONTROL