COLLECTED WISDOM™ on Fiduciary Responsibility and Liability Issues

This archive contains not only the most current material on the topic, but also older items that are still relevant, provide background, perspective or are germane to the topic.

If you find a broken link or an items that you feel is outdate, irrelevant or no longer appropriate, please let us know.

Other topical areas you may find of interest that are not fully covered here include ERISA 404(c) Compliance and Fiduciary Duty, 401k Investment Committees, Fiduciary Related News and Intelligence, and DOL's Final Fiduciary Rule and Best Interests Contract Requirement.

Peeling Back the Fiduciary Layers and Unscrambling the Fiduciary Confusion

In seeking clarity about the "type" of 401k professional it has retained, plan sponsors often find the answers they are given to be incoherent with a slant in favor of the 401k industry instead of plan participants. The residual fuzziness plan sponsors are left feeling about this topic is a source of significant irritation to them. This comprehensive article attempts to peel back the fiduciary layers and unscramble the fiduciary fuzziness.

Source: 401khelpcenter.com

Navigating the Minefield of Fiduciary Liability

The failure to fully execute the fiduciary duties ERISA imposes upon 401k plan employers and administrators can lead to significant liability exposure. This article will help plan sponsors navigate the minefield of fiduciary liability including reviewing the litigation risk and suggesting some best practices.

Source: 401khelpcenter.com

Ten Fiduciary Duties

Because of a number of factor including the recent class action lawsuits and a new focus by the Department of Labor and Internal Revenue Service on a number of issues including fees, plan sponsors need to be more vigilant. They also should take proactive steps to ensure that all plan fiduciaries have a good understanding of their obligations in overseeing the company's retirement plans. Here is a general overview of fiduciary duties and responsibilities.

Source: 401khelpcenter.com

Achieving Fiduciary Excellence

In today's increasingly competitive environment, more advisory firms are seeking to differentiate themselves and grow AUM by formalizing their commitment to fiduciary excellence. 139 investment advisory firms from around the world have done just that, achieving certification by the Centre for Fiduciary Excellence. This report provides an inside look at how those advisory firms operate their practices.

Source: Broadridge.com, June 2023

The Who, When and Why of Independent Fiduciaries

Employee benefit plan sponsors may need to hire an independent fiduciary in certain situations to avoid conflicts of interest and prohibited transactions under ERISA. What is an independent fiduciary, and when might a plan need one?

Source: Wagnerlawgroup.com, May 2023

Fiduciaries Must Revisit ERISA Origins

ERISA was created with important protections for plan fiduciaries who are judged as prudent experts under ERISA's fiduciary standard of care. In this article published May 24, 2023, by Law360, ERISA attorney Jeff Mamorsky explores the history of ERISA and why the underpinnings of ERISA are more important than ever.

Source: Cohenbuckmann.com, May 2023

DCIIA Publishes Guide to Fiduciary Models

The Defined Contribution Institutional Investment Association published this month a governance model guide for plan sponsors, "Defined Contribution Plan Governance Models: A Guide for Plan Sponsors." The guide outlines governance and fiduciary structures that plan sponsors can elect to fit their plan's needs.

Source: Planadviser.com, April 2023

Are BlackRock's Target-Date Funds the New Fiduciary Battlefield?

A new wave of lawsuits focuses on the alleged underperformance of certain TDFs that many plan sponsors use as their plan's default investment option. In these most recent cases, each of the defendants offered the Blackrock TDFs as the default investments in their DC retirement plans. These new lawsuits allege that investment returns were sacrificed in favor of plan sponsors chasing low fees. The claims are largely that the BlackRock TDFs are inappropriate for institutional plans and that fiduciaries were not prudent in selecting these lower-cost investment options.

Source: Icemiller.com, April 2023

Missing Participants? Search Efforts Are a Fiduciary Duty

Finding missing retirement plan participants is an ongoing -- and necessary -- challenge for employers. Whether your organization offers a defined contribution or a defined benefit pension plan, you have a fiduciary duty to find missing participants.

Source: Usicg.com, April 2023

Principled Performance Drives Fiduciary Excellence

Principled Performance is an approach to the fiduciary role by which managers reliably achieve objectives, address uncertainty, and act with integrity on behalf of the employees and their beneficiaries who participate in employee benefit plans.

Source: Rolandcriss.com, April 2023

A Checklist for Your Retirement Plan Fiduciary Insurance Renewal

In response to the continued proliferation of lawsuits against retirement plan fiduciaries, fiduciary liability insurers are raising rates, limiting coverage, and expanding their due diligence of fiduciary processes. This article provides a checklist that includes tips and best practices for policyholders to ensure they are in a strong position to obtain retirement plan fiduciary coverage when it comes time to review and avoid coverage denials when it comes time to pay benefits.

Source: Bradley.com, December 2022

ERISA Fiduciaries May Consider ESG Factors in Selecting Investments and Exercising Shareholder Rights

This final rule effectively overturned two rules published in the last months of the Trump administration, which essentially prohibited the consideration of ESG factors when ERISA fiduciaries selected investments or exercised shareholder rights. In effect, the Biden administration has now enabled fiduciaries managing ERISA funds to consider "factors [that] may include the economic effects of climate change and other ESG considerations on the particular investment or investment course of action."

Source: Mintz.com, December 2022

ERISA Section 404(c) Protection: A Refresher for Fiduciaries

Section 404(c) of ERISA relieves fiduciaries from liability for participants' and beneficiaries' investment decisions in participant-directed individual account plans (like 401ks) if four requirements are met. They are reviewed in this article.

Source: Verrill-law.com, October 2022

Why Plan Sponsors Should Allow Independent Fiduciaries to Manage Employer Stock in Retirement Plans

The biggest value to using an independent fiduciary in this context is that it dramatically increases the likelihood that a plan fiduciary, sued for the drop in value of employer stock held by employees in a benefit plan, can end the case at the motion to dismiss stage. Author reviews why this is.

Source: Bostonerisalaw.com, October 2022

What Broker-Dealers Need to Know About Correcting PTE 2020-02 Mistakes

The DOL expanded its interpretation of fiduciary advice in the Preamble to PTE 2020-02 and as a result, many more broker-dealers and their registered representatives are fiduciaries for their recommendations to retirement investors, including rollover recommendations. Broker-dealers should implement good processes and documentation to satisfy the PTE conditions and closely supervise their investment professionals to ensure that the processes are followed.

Source: Brokerdealerlawblog.com, September 2022

Achieving Fiduciary Excellence

More advisory firms are seeking to differentiate themselves and grow AUM by formalizing their commitment to fiduciary excellence. 139 investment advisory firms from around the world have done just that, achieving certification by the Centre for Fiduciary Excellence, the gold standard for signifying adherence to fiduciary best practices. This report provides an inside look at how those advisory firms operate their practices.

Source: Broadridge.com, September 2022

What Retirement Policies Should Your 401k Plan Have in Place

Having clear policies and procedures for 401k plans helps employees involved in the plan administration do their job more efficiently by mapping out steps to take when various situations arise. ERISA and the DOL guidance recommend retirement plans maintain some of these policies and, while not required by law, are helpful in the event of a DOL audit or participant litigation. This article reviews what policies you should consider having and what they entail.

Source: Consultrms.com, August 2022

Plan Fiduciaries: The DOL Proposes Enhanced QPAM Requirements

On July 26, 2022, the DOL released a proposed amendment to Prohibited Transaction Class Exemption 84-14, known as the Qualified Professional Asset Manager exemption. The QPAM exemption is frequently relied on by investment fiduciaries, including fund managers and investment advisers, to avoid engaging in transactions concerning employee benefit plans that might otherwise be prohibited by ERISA. If adopted, the proposed amendment would, among other things, increase the minimum capitalization and assets under management requirements for a manager to qualify as a QPAM, require that QPAMs register with the DOL, and require that agreements between QPAMs and their clients be amended to include specific indemnity and other provisions.

Source: Lowenstein.com, August 2022

DOL Proposes Substantial Amendments to QPAM Exemption

These amendments would significantly impact entities that rely on the QPAM Exemption, as well as plans, plan fiduciaries, counterparties to transactions involving QPAMs, and others. The amendments would impose significant compliance burdens and costs on QPAMs, including the need to amend existing agreements to comply with the conditions. Additionally, the indemnification and hold harmless provisions are likely to increase the potential liabilities of a QPAM that becomes disqualified.

Source: Fiduciarygovernanceblog.com, August 2022

401k Plans and Crypto

Due to the growing popularity of and attractive returns on cryptocurrencies, 401k participants are urging plan fiduciaries to permit these investments. However, crypto investment can be an unpredictable ride. Whether this volatility can be squared with fiduciary duties imposed by ERISA needed clarification. ERISA's fiduciary duties have been described as the "highest known to the law." Fiduciaries wrestle with related issues including: Should crypto be part of the core investment menu available to all plan participants? Do fiduciaries have an obligation to limit crypto investment even in a plan's self-directed brokerage option?

Source: Fisherphillips.com, July 2022

Plan Sponsors' Fiduciary Duty for DC Plan Compliance Testing

As fiduciaries, defined contribution plan sponsors must act in the best interest of all participants and ensure that the plan itself does not cater to one person or group over another. To make sure this rule is being followed, ERISA requires that plans undergo annual compliance tests. To help prevent any potential issues, plan sponsors need to understand the testing requirements and communicate with service providers regarding any changes to the plan. This article presents ways a plan sponsor can potentially avoid testing issues and correct them when they arise.

Source: Bdo.com, July 2022

Hughes v. Northwestern University: A Message to Fiduciaries From the Supreme Court

"That reasoning was flawed." With those four words, the Supreme Court of the United States reaffirmed that retirement plan fiduciaries' responsibilities apply independently to each investment option. Offering a lot of investment options does not eliminate the responsibility related to each of them. Offering some cheap investment options does not excuse expensive ones. Offering some stronger performers does not excuse poor performers. The bad stuff is not okay simply because there's also some good stuff. This 12-page paper underscores why plan fiduciaries must take notice of this ruling.

Source: Qualifiedplanadvisors.com, July 2022

Brokerage Window Fiduciary Duties in Light of DOL Cryptocurrency Guidance

The DOL recently issued a warning about its intention to launch an investigative program into those plans that offer cryptocurrency and related products as investment options. The DOL's investigative program would include those products offered through brokerage windows, implying that plan fiduciaries might be responsible for those investments. Therefore, plan fiduciaries need to carefully consider their potential responsibilities concerning brokerage windows, both concerning cryptocurrency and investments.

Source: Hallbenefitslaw.com, June 2022

Fiduciary Vulnerability Takes a Hit

The legal community's persistent emphasis on fees paid by retirement plans to their service providers has set the stage for a turn in the vulnerability of the individuals who oversee retirement plans. Fiduciary liability insurers have taken note of the recent surge in lawsuits leveled against employers and their executives for allowing service providers to charge excessive fees to the retirement plans they sponsor and manage. The result is a significant increase in many employers' risk exposure.

Source: Rolandcriss.com, May 2022

When Recordkeepers Merge

Businesses that provide recordkeeping services to defined contribution retirement plans are merging at a dizzying rate. What considerations should plan sponsors resolve when a competitor or aggregator acquires their recordkeeper or third-party administration firm?

Source: Rolandcriss.com, April 2022

When Providers Use Plan Participant Data for Purposes Unrelated to a Plan: What Employers Need to Know

There is a growing trend of using participant data to cross-sell financial products unrelated to plan recordkeeping by large recordkeepers and asset custodians of employer-sponsored retirement plans. In light of the fact that plan fiduciaries are ultimately legally responsible for the management and mismanagement of a retirement plan, this trend to use participant data may raise issues for employers in their role as plan sponsors and fiduciaries.

Source: Ogletree.com, April 2022

CITs Have Different Fiduciary Implications Than Mutual Funds

Plan sponsors considering collective investment trusts for their 401k plans should focus on the product provider's CIT governance policies and procedures, according to industry experts.

Source: Planadviser.com, April 2022

DOL Warns 401k Plans Against Allowing Crypto Investments

The DOL is warning 401k plan fiduciaries to "exercise extreme care" before considering whether to include a cryptocurrency option in a plan investment menu. The sternly worded guidance, in Compliance Assistance Release No. 2022-01, published March 10, reveals heightened skepticism of 401k cryptocurrency investments and predicts new DOL enforcement activity for fiduciaries who permit participants to invest in cryptocurrencies.

Source: Shrm.org, March 2022

DOL Threatens to Investigate Fiduciaries Over Cryptocurrency in 401ks

Compliance Assistance Release No. 2022-01 is a significant departure from DOL's established regulatory norms. The author states that they are not aware of any other instance in which DOL has made such sweeping statements about the potential prudence of an entire asset class. DOL has recently elected to back away from proposals to create special standards for specific asset classes. However, in the Release, DOL implies that the agency will presume that fiduciaries making cryptocurrencies available have acted imprudently.

Source: Groom.com, March 2022

On the Hunt for Good Fiduciary Processes? What to do After the Supreme Court Decision in Hughes

The Supreme Court recently handed down its eagerly-awaited decision in Hughes v. Northwestern University. Plan sponsors and 401k and 403b plan administrators had hoped the decision would create clearer pleading standards to free them from the endless line of ERISA class actions alleging fiduciary malfeasance when selecting investment menus and plan service providers. It didn't and now those fiduciaries have some more thinking to do.

Source: Cohenbuckmann.com, March 2022

Understanding 408(b)(2) Disclosures

A Covered Service Provider must provide a 408(b)(2) disclosure to the retirement plan fiduciaries. This article describes what is in a 408(b)(2) disclosure, why is this disclosure necessary, and some 408(b)(2) best practices.

Source: Multnomahgroup.com, February 2022

After Supreme Court Ruling, Are TDFs a Ticking Time Bomb of Fiduciary Liability?

The Supreme Court did not rule on the viability of Hughes' claim nor on whether the case should be heard. It just stated that the Seventh Circuit cannot dismiss the case in the manner which it did. The Seventh Circuit must now reconsider whether to dismiss the case. Despite the nature of the Hughes case, the wording in the Supreme Court decision may have an impact on how other 401k cases are treated.

Source: Fiduciarynews.com (registration may be required), January 2022

Cybersecurity Preparedness Checklist for Plan Fiduciaries

401k plans face significant cybersecurity risks for which there is no federal safety net. Service providers are very much on the front line, but plan fiduciaries need to treat cybersecurity with the same high degree of diligence that they exercise with investment decision-making and all other plan administrative matters. The key to mitigating risk is conducting a self-assessment using the Cybersecurity Preparedness Checklist for Plan Fiduciaries and building a strategy around the results of that assessment.

Source: Mcdonaldhopkins.com, January 2022

Can Retirement Plan Service Providers Be Trusted?

Organizations that sponsor employee benefit plans are generally responsible for ensuring that their plans comply with federal law, including ERISA. Many sponsors rely on service providers to advise and assist them with their employee benefit plan duties. But service providers to retirement plans are changing their stripes. That makes the job of selecting and monitoring them more challenging than ever.

Source: Rolandcriss.com, January 2022

Bridging the Gap Between the Retirement Plan Fiduciary Committees and IT

Technology-empowered threats to the security and confidentiality of retirement plan assets and data are exploding. Current fiduciary management methods largely lack a formal interface with the information technology function and its storehouse of expertise. These two realities demand that fiduciary committees embrace their enterprises' information technology departments in a new era of collaboration.

Source: Rolandcriss.com, January 2022

CPAs Shift Audit Risk to Plan Fiduciaries

SAS 136 transfers a significant amount of liability for an audit's accuracy from an auditor to a plan's fiduciaries. SAS 136 intends to enhance the quality of audits of ERISA plans by adding new procedures to CPAs' audits beginning December 15, 2021. The burden for producing the added plan-related documentation required will likely fall to employers' human resources departments.

Source: Rolandcriss.com, January 2022

ERISA Requirements Calendar

Sponsors of defined benefit and defined contribution plans should keep deadlines and other important dates in mind as they work toward ensuring compliance with their plans in 2022. Dates assume a calendar year plan. Some deadlines may not apply or may have dates shifted based on your organization's fiscal year.

Source: Bdo.com, December 2021

Add Value by Helping Plan Sponsors Develop a Fiduciary Calendar

To manage their responsibilities, plan sponsors should develop procedures that facilitate prudent decision-making and demonstrate that the plan sponsor is disciplined about following those procedures. RPAs can add value to their retirement plan support services by helping plan sponsors develop a strategy for satisfying their fiduciary responsibilities under ERISA, including a fiduciary calendar.

Source: Newportgroup.com, December 2021

401k Annual Administration - A Checklist for 2022

A checklist can serve another important purpose, monitoring your 401k provider's job performance. As a 401k fiduciary, you can't simply assume your 401k provider is doing their job. You must "monitor" them to ensure they're doing a competent and timely job. A checklist can make monitoring easy.

Source: Employeefiduciary.com, December 2021

Cybersecurity and Data Privacy for Benefit Plans

Failing to adequately address data privacy and security will likely result in a breach of fiduciary duty claim. Knowing there is sensitive data at risk, what should employers, plan administrators and their plans do? This article contains some helpful starting points.

Source: Clarkhill.com, December 2021

Why You Should Encourage "Mini" Retirement Plan Audits

From the annual hassle of engaging an accountant to review retirement plan financials to the ever-present threat of a DOL investigation, "audit" is practically a four-letter word for plan sponsors, financial professionals, and administrators. But they don't have to be a bad thing. Regularly conducting "mini" plan audits allows compliance to be broken down into more manageable, bite-sized pieces. These voluntary reviews require minimal time and resources and can pay big dividends.

Source: Voya.com, November 2021

Retirement Fiduciary Calendar for 2022

This Retirement Fiduciary Calendar for 2022 makes it fast, simple, and easy for plan sponsors to keep their retirement plans in compliance with Internal Revenue Service, Department of Labor, and ERISA regulations. When used, it will help them stay in front of administrative deadlines and submission complexities.

Source: Tri-ad.com, November 2021

2021 Best Practices Conference: Understanding ERISA and Fiduciary Fundamentals

During the first session of the virtual 2021 PLANSPONSOR Best Practices Conference, experts discussed the requirements for maintaining retirement plan documents and operating a plan according to ERISA. They also discussed what should be reported to participants and regulators, and how sponsors can adhere to fiduciary duties.

Source: Plansponsor.com, November 2021

Managing Fiduciary Responsibility

With ERISA lawsuits alleging negligence and mismanagement on the rise, fiduciary liability insurance is a critical component of managing a retirement plan. However, experts say settlements in the tens or hundreds of millions of dollars are forcing insurers to institute dramatic premium increases. Some carriers are hesitant to offer such coverage at all. This article investigates the risks associated with fiduciary responsibility, the need for fiduciary liability insurance, and ways employers can secure coverage and reduce the likelihood of litigation.

Source: Captrust.com, October 2021

DOL Proposes Rule Encouraging ESG and Proxy Voting, Reducing Documentation Requirements

The proposed rule would largely retain the basic framework of the investment duties regulation while reinstating guidance similar to the sub-regulatory framework that existed immediately before the 2020 rules. For example, the proposed rule retains two longstanding principles. First, the duties of prudence and loyalty require ERISA plan fiduciaries to focus on material risk-return factors and not subordinate the interests of participants and beneficiaries to objectives unrelated to the provision of benefits under the plan. Second, the fiduciary act of managing plan assets includes making decisions about voting proxies and exercising shareholder rights. While the framework is the same, the proposed rule would include changes that seem likely to result in greater leeway for fiduciaries to include ESG investments in plans.

Source: Groom.com, October 2021

A Volatile Stock Market is a Menace for Fiduciaries

Plan sponsors face peculiar challenges when securities markets swing wildly. The novel COVID-19 pandemic ushered in a period of severe volatility in the stock and bond markets. Combine that with employees riddled with anxiety about the safekeeping of their retirement plan assets, and the scope of a fiduciary's burden seems unmanageable. On any regular day, the legal duty imposed on the members of investment and benefit plan committees is already formidable. The antidote for such challenging conditions is a precise and disciplined management process built on a foundation of principled standards. This 5-page article discusses ways duty-bound executives can cut their legal risks and sustain peace of mind despite our chaotic times.

Source: Rolandcriss.com, September 2021

When Fiduciaries Fail

Reports are plentiful of employers trapped in legal proceedings for violating their trusted role as the overseer of their employees' retirement plans. Until recently, we only heard rumors of suspected lethargy among the overseers. But the frequency and number of failed leadership allegations among them on social media, in the 24-hour broadcast news cycle, and print media tends to taint the reputations of all employers in the public eye. Wisdom calls for a change in fiduciary behavior.

Source: Rolandcriss.com, September 2021

Recordkeeper Consolidation Triggers Fiduciary Responsibilities

401k plan recordkeeper consolidation is proceeding at a rapid pace as a response to shrinking profit margins. If your recordkeeper is acquired, passivity is not an option for fiduciaries who are not already familiar with the buyer's business and fee structure. Fiduciaries have a legal responsibility to make sure that their plans have obtained competent services at a reasonable cost, which means that they need to take steps to determine whether staying put or finding a new record keeper is in the interest of plan participants.

Source: Rpaconvergence.com, September 2021

Best Practices for ERISA Fiduciary Responsibilities and Cybersecurity for Retirement Plans

In today's world, most transactions involving retirement plans are conducted electronically, including maintaining and sharing data across multiple platforms. Data and personally identifiable information have become increasingly vulnerable to attack as the information travels across employer and third-party systems. Plan fiduciaries must develop best practices related to cybersecurity. This requires thought and insight and depends on the facts and circumstances. This 12-page paper is an in-depth review of the issue.

Source: Mintz.com, August 2021

Retirement Plan Sponsors Have Ultimate Responsibility for Operational Compliance

Two law firms have issued reminders that plan sponsors are ultimately liable for any plan operational errors, even if they rely heavily on recordkeepers and third-party administrators for day-to-day plan administration. Indemnification clauses in service provider contracts, PEPs, and 3(16) administrators can reduce plan sponsors' fiduciary burden, but none offer complete protection, attorneys say.

Source: Plansponsor.com, August 2021

Best Practices for ERISA Fiduciary Responsibilities and Cybersecurity for Retirement Plans

Mintz Of Counsel Michelle Capezza authored this Thomson Reuters Practical Law Employee Benefits & Executive Compensation Practice Note discussing cybersecurity best practices for retirement plans to address fiduciaries responsibilities imposed by ERISA.

Source: Mintz.com, August 2021

Step Aside 3(16): The 402(a) Fiduciary Is the New Flavor of the Week

In the color-by-numbers world of retirement plan fiduciaries, the 3(21) was the first one on the block, followed quickly by the 3(38). Then came the 3(16), widely sold as the silver bullet that would protect plan sponsors from the liabilities lurking around every corner. Now, the 402(a) fiduciary is ready to kick all of them to the curb...if you believe the sales hype, that is.

Source: Dwc401k.com, August 2021

How DOL's Cybersecurity Guidance Impacts Retirement and Health/Welfare Plans

The DOL issued cybersecurity guidance to plan fiduciaries and participants in the form of three separate documents. The first two documents included what amounted to checklists of provisions that plan sponsors should look for in their contracts with service providers such as third-party administrators, trustees, custodians, investment managers, and the like. The third document was directed more toward individuals. This article reviews steps a prudent fiduciary should consider.

Source: Quarles.com, August 2021

Service Provider Fee Disclosures: Understanding the Process

The DOL regulations regarding service provider fee disclosures clarify that plan fiduciaries are responsible for assessing the reasonableness of fees charged to plans in relation to services performed. Before a plan fiduciary is able to assess the reasonableness of plan fees, the fiduciary has to receive required fee disclosures from their covered service provider. A covered service provider is considered a party that enters into an agreement with a retirement plan to provide certain services.

Source: Berrydunn.com, August 2021

Climate Change Defines the Fiduciary

It is now time for fiduciaries to begin or continue a process to identify and manage both the investment risks and opportunities arising from climate change per their fiduciary obligations under ERISA, especially Department of Labor Interpretive Bulletin 2015-01. This article discusses the unique nature of climate change risk to investments: namely, that it is likely to affect all asset classes and sectors, creating both risk and opportunities for fiduciaries.

Source: Fiduciarygovernanceblog.com, August 2021

Plan Committee Checklist to Reduce Your Risk of an Excessive Fee Lawsuit

Your plan committee can have the most diligent process for choosing and monitoring plan administration and investments, but that will not prevent an excessive fee lawsuit. Even plans with the best consultants and quality 3(21) and 3(38) fiduciary investment advisors still get sued. Here is a checklist to help de-risk your plan.

Source: Euclidspecialty.com, August 2021

What Drives Fiduciary Liability?

Aon surveyed 12 top carriers for fiduciary liability insurance to understand their views on the biggest sources of fiduciary risk within the control of fiduciaries for defined benefit and defined contribution plans subject to ERISA. Read to learn more about the key takeaways from the results.

Source: Aon.com, August 2021

A Fiduciary Checklist for 401k Sponsors Is 79 Items Long

A checklist unveiled this week by a fiduciary training group is designed to help 401k sponsors protect themselves from lawsuits. The new checklist, which the group calls FORT, or Fiduciary Oversight of Responsibilities and Tasks, will make them aware, outlining 79 different items that retirement plans must have covered, said Don Trone, CEO of CBCF. Given how rampant 401k litigation has become, that is crucial, he said.

Source: Investmentnews.com (registration may be required), August 2021

Cybersecurity: Another Responsibility for Retirement Plan Sponsors and Fiduciaries

The focus on cybersecurity implies that the DOL will start to hold plans and their fiduciaries accountable for cybersecurity. Besides the specter of a DOL enforcement action, this guidance should remind plan sponsors that if a cybersecurity breach ever impacts their plan, they need to be prepared. Class action lawsuits that argue that they chose the wrong service provider or that PII was misused or not protected are possible.

Source: Enterpriseiron.com, July 2021

Fiduciary Duty Is Coming to Privacy: Through Your Benefit Plans

While all businesses have been grappling with cybersecurity challenges for years, cybersecurity has recently come into focus for retirement plans, health and welfare plans, and other ERISA plans due to a new DOL cybersecurity initiative. The DOL has quickly followed up on this guidance by incorporating privacy and cybersecurity requests into its audits of employee benefit plans. This article outlines considerations for plan fiduciaries, including employers and investment or administrative committees, to document that they have followed a prudent process to protect the plan from losses from cybersecurity events and to protect the personal data of participants and beneficiaries.

Source: Kilpatricktownsend.com, July 2021

Mitigating Fiduciary Risk: Lessons Learned About the Prudent Person Rule After Fifteen Years of Fee Litigation

Excessive fee litigation has encouraged the reexamination of fiduciary best practices. Although the facts underlying these cases vary, the fundamental questions in each case pertain to the process by which the fiduciaries carried out their responsibilities. As courts have grappled with questions of fiduciary responsibility, a body of case law has been developed that provides valuable guidance on methods plan fiduciaries may use to mitigate their risk if faced with a lawsuit or government investigation. This article addresses the duty of prudence in monitoring plan investments, thereby mitigating fiduciary risk through the lens of that body of case law.

Source: Truckerhuss.com, July 2021

DOL Exemption Impacts Investment Advice Fiduciaries

The DOL recently issued guidance concerning a new exemption under the prohibited transaction provisions of ERISA in connection with the provision of investment advice. PTE 2020-02, Improving Investment Advice for Workers & Retirees, became effective on February 16, 2021. On April 13, 2021, the DOL issued additional guidance, in FAQ format, to further explain the Exemption. In this article, the authors explain the significance of this new guidance.

Source: Mwe.com, July 2021

All in: Understanding the Total Cost of Your Retirement Plan

As the retirement plan industry continues to evolve, with new products and solutions announced daily, plan sponsors have to remain diligent that they fulfill their fiduciary obligation to their participants. PLANSPONSOR recently spoke to James about the need for transparency in the retirement plan industry and what plan sponsors should evaluate when examining costs.

Source: Plansponsor.com, July 2021

Considerations for Engaging a 3(21) or 3(38) Fiduciary

Thinking about engaging a 3(21) or a 3(38) fiduciary? A new podcast by CAPTRUST discusses some of the key distinctions in terms of risks and responsibilities.

Source: Napa-net.org, July 2021

Cybersecurity for Plan Fiduciaries: Focus on Account Theft

Retirement account theft is one of the risks cropping up in the employee benefits community. If you are a plan sponsor or a plan fiduciary, it's important to make sure you've thought about how to address this risk that is now well above the horizon. As an ERISA fiduciary, you play a key role in helping your participants guard against the theft of their accounts at the hand of cybercriminals. Take the steps noted above and stay abreast of developments in this rapidly evolving area.

Source: Plansponsor.com, July 2021

Best Practices to Reduce Excessive Fee Risk

The role of retirement plan governance has become increasingly important as employers face increased scrutiny of how they operate their 401k plans in the current legal and regulatory environment. CFOs and human resource managers administering 401k plans and serving on 401k plan committees have increasingly been held responsible for fiduciary breaches. Plan fiduciaries should conduct due diligence to reprice services and replace underperforming funds given asset-based fees and significant growth in plan size, due to rising markets and recurring contributions.

Source: Cpajournal.com, July 2021

3(38) Plan Sponsor Pitfalls

In this article, CAPTRUST's Alysa Cronin takes a deep dive into potential 3(38) pitfalls for plan sponsors. Armed with insights from a few industry leaders, this easy read outlines key takeaways on four common plan sponsor pitfalls when selecting a 3(38) investment manager and how to avoid them.

Source: Captrust.com, June 2021

What 401k Plan Sponsors Need to Know About the Investment Policy Statement

When you're a 401k plan sponsor, you hear a lot about an investment policy statement and how you need one. Yet many plan sponsors don't know what it is or what it does. This article breaks down what an IPS is, what it does, and what it doesn't do.

Source: Jdsupra.com, June 2021

Using Mandatory Arbitration to Avoid ERISA Class Actions

With the significant increase in fiduciary breach class actions, plan fiduciaries have added provisions, including mandatory arbitrations, to their contracts, to gain control of and rein in litigation. The burning question, however, is where do the courts stand on forcing ERISA plan participants to engage in arbitration.

Source: Cohenbuckmann.com, June 2021

New Research From PSCA Illuminates Common Plan Committee Practices

If there was ever a meeting that couldn't be replaced with an email, it's that of a retirement plan committee, and while those structures are as varied as the companies that sponsor them, a new survey by the Plan Sponsor Council of America uncovers some key consistencies in structure and approach. Indeed, retirement plan committees have always been an essential element in assuring prudent retirement plan operation and administration. While there is perhaps no perfect number of committees -- or committee members -- their construction, monitoring, and maintenance through rotations and training are as critical to their effective operation as it is to the design of the plan functions they oversee.

Source: Psca.org, June 2021

Court Finds Sponsor Not Liable for Plan Account Theft

The US District Court for the Northern District of Illinois handed down a decision in Bartnett v. Abbott Laboratories, dismissing the plaintiff's claims against defendant sponsor fiduciaries in a case involving the theft of $245,000 in the plaintiff's Abbott retirement plan account. Particularly interesting for plan sponsors is the court's discussion of the sponsor fiduciary's standard of care concerning a plan provider's cybersecurity.

Source: Octoberthree.com, May 2021

Retirement Plan Fees Worsen Enterprise Risk

A new era of employee activism is underway in which plaintiff lawyers find fertile ground for litigation opportunities, catching many employers unprepared. The focal point of the growing number of such lawsuits is the compensation that employers arrange for payment to the vendors of services to the ERISA plans. Underestimating the economic and reputational risks related to deficiencies in the prudent management of ERISA plans threatens an entire enterprise.

Source: Rolandcriss.com, May 2021

The Benefits of Enacting a Plan Sponsor Philosophy

Overwhelmed by a lengthy to-do list, including the perpetual need to meet many ERISA regulatory obligations, plan fiduciaries often lose sight of the foundation for sponsoring a retirement plan: its purpose. Enacting a Plan Sponsor Philosophy is an effective way for committee members to remind themselves of this basic goal.

Source: Porteval.com, May 2021

Two Approaches to Benchmarking Plan Fees

Benchmarking retirement plan fees has become more complex in recent years, as it has moved beyond just scrutinizing recordkeeping and administrative fees. There are two ways sponsors can benchmark their fees. There is the traditional approach of doing an external benchmark by issuing an RFI or RFP. The other approach is to use information from a database of plan sponsors to compare fees paid.

Source: Plansponsor.com, May 2021

A Long Time Coming: The DOL Issues Cybersecurity Guidance

Given that the majority of plan sponsors and fiduciaries likely already have existing service providers that aid in the administration of their benefit plans, plan sponsors and fiduciaries may consider amending the applicable service agreement to include some or all of the provisions recommended here to the extent there is not sufficient contractual protection under the existing agreement.

Source: Frostbrowntodd.com, May 2021

Develop Your Fiduciary Toolkit

A fiduciary toolkit equips finance and human resources executives with knowledge, procedures, and performance measurements to drive operations, strategy, and compliance. This 5-page article examines the categories of best practices and how to evidence conformance to them.

Source: Rolandcriss.com, May 2021

Participant Data: Plan Asset or Fair Game for Recordkeepers to Use to Market Non-Plan Products?

In an emerging theory of liability, plan fiduciaries' treatment of participants' data is coming under scrutiny. Over the last five years, we have seen how the collection of many individuals' data can become a valuable asset in the right hands, whether it's used to influence an election, design a marketing plan that targets individuals based on their specific preferences and needs, or just to compile large troves of information to analyze trends.

Source: Truckerhuss.com, May 2021

Does the Recently Amended Investment Duties Regulation Change How Fiduciaries Are Expected to Make Investment Decisions

The final rule on investment decision-making that emerged from the filter of constituent comments does not prohibit fiduciaries of ERISA employee benefit plans from selecting investments that have ESG or other collateral objectives or benefits and does not create different standards for consideration of such investment options. Rather, the amended regulation requires that fiduciaries make investment choices based on consideration of pecuniary factors, which is consistent with the DOL's existing guidance. The final rule does, however, shift focus from considering investment options under the totality of the facts and circumstances to considering only defined pecuniary factors to the exclusion of non-pecuniary factors. This could be a distinction without a difference, however, given the expanded interpretation in the preamble and the flexibility incorporated into the final regulatory language.

Source: Wagnerlawgroup.com, April 2021

Cybersecurity Program Best Practices

The DOL has prepared these best practices for use by recordkeepers and other service providers responsible for retirement plan-related IT systems and data, and for plan fiduciaries making prudent decisions on the service providers they should hire.

Source: Dol.gov, April 2021

Participant Directed Investments Through Brokerage Windows: The Last Frontier or a Trap for the Unwary?

What should fiduciaries of participant-directed plans consider in deciding whether to allow participants to direct their investments using arrangements loosely referred to as "brokerage windows"? The realm of ERISA plan investments through these arrangements remains largely uncharted territory. Fiduciaries operate under the broad understanding that ERISA Section 404(a) fiduciary duties of prudence and loyalty apply, but with little guidance on how.

Source: Wagnerlawgroup.com, April 2021

The Line Between Education and Fiduciary Advice

Does the industry have a clear definition of what the DOL would consider investment education (not advice) in a 401k plan so that a financial advisor would not have to follow the requirements of Prohibited Transaction Exemption 2020-02?

Source: Napa-net.org, April 2021

The Key to Avoiding Retirement Plan Excessive Fee Litigation

The recent increase in litigation over retirement plans and, specifically, the fees those plans are being charged for administration and management, has many companies concerned about what they need to do to protect the plans they manage. Two recent federal district court rulings illustrate the necessity for plan sponsors to have a prudent decision-making process in place to successfully defend against excessive fee litigation.

Source: Hallbenefitslaw.com, April 2021

A Checklist for Retirement Plan Committees

Given that there are so many considerations to weigh when overseeing a retirement plan, it is important for plan sponsors to have a checklist for their committees -- whether the sponsor has a single retirement plan committee or dual investment and administrative committees -- to cover in quarterly meetings. Experts discuss what main facets of a retirement plan that a committee should cover in its quarterly meetings.

Source: Plansponsor.com, March 2021

Evaluating Target-Date Funds Is a Fiduciary Responsibility

Many fiduciaries responsible for selecting their 401k plan's target-date funds don't understand how these funds work. The risk of staying ignorant is increasing. Lawsuits challenging target-date fund selection are on the rise, and plan fiduciaries need to be able to defend their choices in response to these suits. New products, such as target-date funds that provide lifetime income options or make private equity investments are becoming available. For all of these reasons, if target-date funds are included in a plan's investment menu, fiduciaries need to develop a prudent process for evaluating the funds in partnership with their investment professionals.

Source: Cohenbuckmann.com, March 2021

The Benefits of Enacting a Plan Sponsor Philosophy

Overwhelmed by a lengthy to-do list, including the perpetual need to meet ERISA regulatory obligations, plan fiduciaries often lose sight of the foundation for sponsoring a retirement plan: its purpose. Enacting a Plan Sponsor Philosophy is an effective way for committee members to remind themselves of this basic goal. Unlike a Committee Charter, which sets the lines of authority, or an Investment Policy Statement, which outlines acceptable actions, a philosophy defines a retirement plan’s purpose, making it a useful reference tool for committees during the decision-making process.

Source: Porteval.com, March 2021

The Art and Science of Fee Benchmarking

Fee benchmarking can be a great tool for plan sponsors to ensure that their plan fees are fair and reasonable and also help to fulfill a fiduciary responsibility. Since each fee benchmarking platform has a unique process for aggregating and reporting data, plan sponsors should consider how various data sources, pools of data or report customizations may impact the accuracy and reliability of the report.

Source: Rpgconsultants.com, February 2021

Retirement Plan Fiduciary Duties Under DOL Missing Participant Guidance

The DOL's new missing participant guidance confirms that the DOL expects to see written policies and procedures regarding these terminated vested participants and puts in writing many, if not all, of the various suggestions DOL investigators have made for locating these participants during investigations. In certain respects, the documents also offer welcome transparency, in particular regarding the investigative processes and case-closing practices that investigators should be following when conducting these investigations.

Source: Thompsonhine.com, February 2021

Resources to Help Identify, Manage, and Avoid Retirement Plan Vendor Conflicts

Fiduciaries are required by ERISA to monitor the services providers to their plan. This includes monitoring any conflicts of interest. This retirement plan vendor conflict resource will help you identify, monitor, and avoid any conflicts with your plan's service providers, plus a worksheet to assist in asking the right questions about potential conflicts.

Source: Multnomahgroup.com, February 2021

Meeting Minutes: The Importance of Documenting Your Process

Meeting minutes capture the discussion and decisions of the investment committee. Several sets of meeting minutes help weave together the story of the actions the committee has taken related to their retirement plan. All employer-sponsored retirement plans are different. As the industry evolves, plans adopt different strategies at various times. A committee may take several years to execute plan changes. Meeting minutes provide the roadmap on what the committee was doing and how the committee reached its desired result.

Source: Multnomahgroup.com, February 2021

The New E-Delivery Rule: The Price of Simplification

The DOL has simplified the delivery of retirement plan information to participants through its new electronic disclosure rule. Although the E-Delivery Rule promises to expand the use of electronic delivery, retirement plans still retain a fiduciary duty to protect participants' personal information from cybertheft. Thus, retirement plans taking advantage of the new rule may face increased exposure to ERISA fiduciary breach claims alleging inadequate cybersecurity measures. This article discusses the DOL's E-Delivery Rule and the fiduciary considerations applicable to plans that rely on the new rule.

Source: Asppa.org, February 2021

Does the Investment Duties Regulation Change How Fiduciaries Are Expected to Make Investment Decisions

The more things change the more they stay the same. Or do they? This question should be on every employee benefit plan fiduciary's mind after January 12, 2021, when an amended DOL regulation went into effect changing the standards under which fiduciaries are expected to make investment decisions for ERISA employee benefit plans.

Source: Wagnerlawgroup.com, January 2021

Best Practices for ERISA Plan Fiduciary Governance

Plaintiffs' class action lawyers in fiduciary breach lawsuits, the DOL in ERISA plan audits, courts, and insurers have focused increased attention on how well ERISA plan fiduciaries follow procedural due process. Actions (or inactions) of committees and individual fiduciaries are scrutinized and judged in increasing detail, causing fiduciaries to wonder if they are up to date on all best practices for plan governance. This article is about best practices for ERISA plan fiduciary governance.

Source: Winston.com, January 2021

Lessons Learned From ERISA Class Action Litigation Arising Out of the "Great Recession"

Often fiduciary duties are magnified and called into question when the country is plunged into an economic crisis and retirement plans suffer significant losses. Most notably, we saw an increase in the number of ERISA class action lawsuits in the wake of the Great Recession of 2008. This article analyzes the ERISA litigation trends that emerged after the Great Recession, the lessons learned, and what we may expect in the wake of the economic impacts resulting from the novel coronavirus pandemic, COVID-19.

Source: Dechert.com, January 2021

3(38) Advisor in 2021

2021 is a good time for retirement plan sponsors to consider hiring an advisor who will accept delegation to serve as their 401k plan's fiduciary investment manager. Often known as a 3(38) advisor, these professionals bring a high level of investment expertise and fiduciary prudence to the selection and monitoring of 401k plan investments. They also remove that responsibility -- and the potential liability that accompanies it -- from the plan sponsor.

Source: Alliant401k.com, January 2021

Retirement Fiduciary Calendar for 2021

TRI-AD seeks to make it fast, simple, and easy for plan fiduciaries to keep their retirement plans in compliance with the Internal Revenue Service, Department of Labor, and ERISA regulations. They have created this useful calendar to help you stay in front of such administrative deadlines and submission complexities.

Source: Tri-ad.com, January 2021

Back to the Basics: How Will Your Plan Fare in an Audit or Lawsuit?

This is the time of year when we see lots of articles on hot plan trends for 2021 and what benefits innovations plan sponsors are adopting. But the beginning of the new year is also a good time for fiduciaries to review basic plan policies and operations to see how they can be improved. The better these are, the greater the chances your plan will survive an audit or prevail in a fiduciary breach lawsuit. Here are some places to start.

Source: Cohenbuckmann.com, December 2020

White Paper on ERISA 3(16) Services

This 8-page white paper offers insights into the principles that underlie conduct for 3(16) Plan Administrators. It also draws a line between third parties who are qualified to provide ERISA's comprehensive fiduciary 3(16) role and those that only pretend to do so.

Source: Rolandcriss.com, November 2020

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