Many companies offer retirement plans, which is both rewarding and challenging. Managing a plan requires certain actions and involves certain responsibilities that make the person or entity performing them a fiduciary. Fiduciaries play an essential role and are subject to standards of conduct because they act on behalf of the participants. Their responsibilities include:
- Acting solely in the interest of plan participants. This means that it’s important to maintain the plan in a way that is effective for multiple people in different situations. When looking to make decisions about the plan, you must look at the needs of the participants as a whole.
- Carrying out duties prudently. This is an essential responsibility of a fiduciary. It requires that the fiduciary has expertise in many areas of a plan, such as investments or choosing a provider. Since not all fiduciaries are experts in all areas, you will want to hire someone with a professional knowledge of the subject.
- Following the plan documents. The plan document is the foundation of a plan’s day-to-day operations. It includes rules on how and when a person can enter a plan or how and when distributions can be made. It is important that you are familiar with the plan document and ensure that you are in compliance with the Employee Retirement Income Security Act (ERISA).
- Diversifying plan investments. This requires you to help minimize the risk of large investment losses. You should consider each plan investment as part of the plan’s entire portfolio and evaluate them periodically.
- Paying only reasonable plan expenses. When choosing plan investments and service providers, fees are an important part of making those selections. Although the law does not give a specific limit to fees, it is a fiduciary’s responsibility to ensure the fees are “reasonable.”
In summary, always remember to make the decisions that will best maximize and protect your participants. Subscribe to Employee Benefit Plans: The 411 for all the information you need on plans, responsibilities and more.