"Fiduciary" is the keyword for retirement plan sponsors to keep in mind when making New Year's resolutions for 2013, say legal experts who know the ins and outs of 401(k) and other defined contribution (DC) plans.
To start the New Year right, advisors in the world of the Employee Retirement Income Security Act (ERISA) should work on becoming better plan fiduciaries. That means setting aside time to provide fiduciary education and training to plan fiduciaries, write Bryan Cave LLP partners Edmund Emerson and Lisa Van Fleet in "New Year's Resolutions for Plan Fiduciaries."
Emerson and Van Fleet go on to quote David Wray, president of the Profit Sharing/401(k) Council of America: "The single most important role a plan sponsor serves is being a fiduciary. With increased complexity in plan design, communications, and investment selection, a fiduciary's job is becoming increasingly challenging."
Any ERISA fiduciary who fails to comply with the applicable standard of conduct may be held personally liable for any plan losses resulting from their breach, say Emerson and Van Fleet, which makes periodic training vital for all ERISA fiduciaries. "The simple act of providing fiduciary training to your organization's ERISA fiduciaries will help establish a record of 'procedural prudence' and is the major step to minimizing fiduciary liability," they write.
Ary Rosenbaum, an ERISA/retirement plan attorney for his firm, The Rosenbaum Law Firm P.C., also offers a set of New Year's resolutions for plan fiduciaries, urging sponsors to use good file maintenance, conduct thorough reviews of current practices and to outsource what they can't handle.
"A plan sponsor that wants no part of the fiduciary process of selecting investment options should hire an ERISA §3(38) fiduciary who will assume the bulk of the liability," Rosenbaum writes in a note published on legal website JD Supra. "The same can be said of plan sponsors that want nothing to do with the day-to-day administration of their retirement plan. They should consider hiring an ERISA §3(16) administrator who will assume the bulk of the liability of plan administration."
Here are five more top New Year's resolutions for plan sponsors as fiduciaries, culled from the legal experts' advice.
1) Keep all plan documents and good records.
Rosenbaum says file maintenance may sound pretty basic, but he notes that after 14 years in the business, he's still surprised how many sponsors don't have copies of all of their plan documents and amendments.
"Too many plan sponsors chuck their plan documents when they get a new one through a plan restatement, but the fact is that there are many times when a plan sponsor may need a copy of a previous plan document or amendment," he writes.
For example, Rosenbaum says, a saved file may come in handy when a plan sponsor seeks a favorable determination letter from the Internal Revenue Service for a new plan document. Or, old plan copies are useful for the plan's termination or for clarifying an ambiguity about benefits or provisions in a current plan document. Rosenbaum recommends going paperless and saving PDFs and emails.
2) Review ERISA bond and fiduciary liability insurance.
All retirement plans covered under ERISA must have an ERISA bond to protect assets from theft, Rosenbaum reminds plan sponsors.
