Duties and responsibilities of a fiduciary, and records that should be maintained.
Not only is it a good practice for purposes of operating your plan in accordance with its terms, but it is also important for purposes of mitigating any possible plan-related legal issues (e.g., an Internal Revenue Service (IRS) audit, a Department of Labor (DOL) audit, participant claims, etc.).
Yes, the below chart describes common duties, though it is not intended to be an all-inclusive list.
Duty of loyalty |
- Act solely in the interest of plan participants and their beneficiaries, with the exclusive purpose of providing benefits to them. |
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Duty to disclose |
- Respond fully and accurately to all participant inquiries. - Tell the truth and deal honestly with all plan participants on all transactions. - Avoid misrepresenting plan provisions by failing to provide all material information participants need. Ensuring a copy of the summary plan description outlining the plan document terms is available to all participants will help in this area. - Provide participants with summarized financial reporting of the plan at least annually. |
Duty of prudence |
- Perform all tasks and duties with skill, prudence and diligence. - Consider obtaining fidelity bond protection to protect against losses due to fraudulent or dishonest actions in handling plan funds. - Ensure plan-related investments are prudent and solely in the interest of the plan participants and beneficiaries. - Complete all due diligence required for evaluating the risks associated with the investment selections offered in the plan. - Select investment providers and investment options. Monitor the performance of each on a routine and ongoing basis. - Avoid any activity that can be construed as a conflict of interest between the plan, the plan administrator or its participants. - Ask for expert advice when needed. Ignorance is not necessarily regarded as a sufficient reason by the IRS or the DOL for failing to perform fiduciary duties appropriately. |
Duty to diversify |
- Select plan investments from a variety of categories and risk levels to minimize the risk of large losses. |
Duty to follow plan document provisions |
- Maintain copies of all correspondence including: plan document, summary plan description, amendments to the plan document and the service provider agreement. - Ensure all contributions are remitted timely. - Pay only reasonable expenses for plan administration and asset investments. |
Duty not to engage in prohibited transactions |
- Do not use plan assets for your own interest. - Do not use plan assets to pay any expenses not specifically authorized in the plan document. - Assets and earnings cannot enrich the plan fiduciary. - Do not associate with or engage in activities related to political campaigns. |
As the plan sponsor, be sure you maintain detailed records of:
The Department of Labor offers extensive educational materials, as well as legislative and regulatory updates, on their website: www.dol.gov/ebsa. It is a useful resource for ongoing education.