14 June 2021
The Department of Labor (“DOL”) and Internal Revenue Service (“IRS”) continuously stress the importance of plan sponsors understanding their fiduciary duties in regard to their employee benefit plan as well ensuring that those duties are being performed. Plan fiduciaries can be a number of different individuals or committees; examples include trustee(s), plan administrator(s), or the plan’s oversight/investment committee members. The main duty of plan fiduciaries is to operate the plan solely in the interest of the participants and their beneficiaries.
The Employee Benefits Security Administration designed the Fiduciary Education Campaign, a compliance assistance initiative, to help educate employers and service providers on their responsibilities to the plan under ERISA. Emphasized responsibilities highlighted by the Campaign are:
- Understanding the plan document and terms of the plan
- Thoroughly selecting service providers and monitoring service providers
- Remitting contributions to the plan timely
- Avoiding conflicts of interest and prohibited transactions
- Providing required disclosures to participants and their beneficiaries timely
- Providing required reports to the government timely
- Diversifying plan investments
Consequences for not following the responsibilities of a fiduciary include liability for any losses to the plan, or any profits made through improper use of plan assets and restoring those losses and profits, and any action that the court believes is appropriate for those who breach their duties under ERISA (this includes their removal).
Having a plan oversight or investment committee that meets on a regular basis to discuss the plan can be essential in documenting that you are performing your fiduciary duties. These minutes can be used to show that plan investments are continuously being reviewed and that you are selecting investments that are in the best interest of the participants, that you are evaluating service providers to make sure they are meeting expectations, and to document discussions for any plan changes.
More information can be found on the DOL and IRS websites.