In a world of changing regulations, shifting market needs and evolving plan designs, defining your fiduciary responsibility as a plan sponsor can be a moving target. The key to keeping your focus in this environment is to establish a consistent process that helps you ensure compliance, reduce risk and maximize outcomes even in the face of changing conditions.
It starts by understanding the obligations of a fiduciary under ERISA, and then implementing a plan to meet and maintain them. We outline here the various elements that you should consider to be part of your plan and also introduce the ten most common mistakes fiduciaries encounter. We expand upon these potential fiduciary mistakes in other parts of the Fiduciary Responsibility Series. Being aware of these steps and potential pitfalls, in addition to seeking guidance from your legal counsel, can help you become a more compliant and responsible fiduciary.
A prudent process
The requirements of fiduciary responsibility are rooted in common sense and sound business practice. While specific regulations may change, a prudent fiduciary process should consider several key points.
Regulatory changes over the past few years have placed more nonprofit retirement plan sponsors into the role of fiduciary. Fiduciaries may be formally designated, or they may be considered fiduciaries by virtue of the role or activities they perform. Because fiduciaries are held to high standards and can be personally liable for breaches, it’s important to clearly identify them, along with any fiduciary responsibilities allocated to third parties as defined under ERISA.
As you’ll see throughout this series, documentation is a critical aspect of fiduciary prudence. In addition to identifying fiduciaries, documentation should also include acknowledgement that fiduciaries understand their roles, along with evidence of initial and ongoing fiduciary training. Sponsors should not downplay the importance of fiduciary training as it has been the subject of recent DOL retirement plan investigations. Meeting notes with fiduciaries should be taken in greater detail than traditional corporate minutes, and all minutes and materials distributed to fiduciaries should be retained, approved and signed by each fiduciary. In this environment, rigorous documentation is necessary to protect your interests, as well as the interests of the plan and its participants.
Seven steps to success
There are some basic steps you can take to help you meet your fiduciary responsibilities.
For additional information on how to address these concerns, you may review other installments of TIAA’s Fiduciary Responsibility Series.Top Ten Fiduciary Mistakes:
For more on this topic and on how fiduciaries can address the challenges they face, visit our Fiduciary Responsibility Series site.