Check the list. Are you a fiduciary?

By Deborah A. Keary Jan 16, 2004
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Q: What are the duties of a retirement plan fiduciary?

A: A fiduciary is a person who has some authority or control over the management of a retirement plan or its assets. This could be a small-business owner, officers of a company or plan trustees and could include the HR professionals in companies that offer retirement benefits. Anyone who helps to make decisions about how a retirement plan is managed, how its assets are invested, or helps to select a plan provider or funds is probably a fiduciary.

The Employee Retirement Income Security Act of 1974 (ERISA) mandates the duties and responsibilities of a plan fiduciary. ERISA focuses on five major duties for a plan fiduciary: first, act in the best interests of plan participants and beneficiaries; second, understand and be aware of all expenses paid from the plan; third, make prudent decisions regarding the plan, including investments and service providers; fourth, act in accordance with plan documents; and fifth, monitor the plan’s investments.

The Small Business Administration (SBA) has developed a checklist for fiduciaries to measure how well they are handling their duties, and reading it might help clarify what those duties entail. Some of the checklist items are these:

  • Do you fully understand your plan document and design?

  • Do your plan fiduciaries meet regularly and keep notes from these meetings?

  • Does your plan have a written investment policy statement?

  • Does your plan offer diversified investments?

  • Have you reviewed the investments available in your plan in the last 12 months?

  • Do you understand the investment costs within your plan?

  • Do you understand the services provided and the costs charged by the people and/or companies that help you to administer your plan?

  • Does your plan provide employee enrollment programs that explain the importance of participation?

  • Does your plan provide asset allocation funds or models for employees who lack investment knowledge?

  • Do you understand the requirements of ERISA?

Failure to comply with ERISA and act responsibly as a plan fiduciary can have serious repercussions, including heavy fines and possibly even jail. According to the SBA, proper fiduciary oversight takes only about an hour a month, and it is time well worth investing. For more information, or to read the SBA report, “Retirement Plan Management for Small Businesses,” click on http://www.sba.gov/nationwide/index.htm.

Deborah A. Keary, SPHR, is director of SHRM’s Information Center and Library.

Please Note: This material is provided as general information and is not a substitute for legal or other professional advice. National members may reach the HR Knowledge Center by calling (800) 283-7476 and choosing option #5 or by using the HR Knowledge Center Request Form found under HR Answers on SHRM Online.
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