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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.

[Common duties chart]

Duty of loyalty

- Act solely in the interest of plan participants and their beneficiaries, with the exclusive purpose of providing benefits to them.

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:

  • Investment Policy Statement (IPS) (if an IPS has been adopted)
    • Document all due diligence relating to the IPS
  • Plan documents, Summary Plan Descriptions (SPDs if the plan is subject to ERISA), amendments, board resolutions, etc.
  • Monitoring reports that you may have received from investment managers, third-party administrators or others
  • Participant notifications and communications, such as:
    • Universal Availability Notices (for 403(b) plans)
    • Black-Out Notices
    • Communications required under state law
  • Discrimination test results (generally, applicable to ERISA plans)
  • Compliance documentation and reporting
  • Signed Form 5500s (applicable to ERISA plans), compliance documentation
  • Financial audits (required for ERISA plans)
  • Results of any IRS and/or DOL inquiry or audit
  • Proof of fidelity bonds (for ERISA plans)
  • Proof of fiduciary insurance (for ERISA plans)
  • Corporate or advisory committee minutes
  • Documentation memorializing decisions regarding the plan
  • Documentation regarding investment providers and products

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.