IS THE PLAN SPONSOR A FIDUCIARY?
By Keith Clark, DWC ERISA Consultants
You are a fiduciary if you exercise any discretionary authority/control related to the management of the plan. For small plans, the CEO or owner (s) is a fiduciary, as they are typically making the decisions on the company’s behalf (regardless if they believe an outside trustee or advisor has been hired). For large plans, trustees of the plan are appointed (typically a plan committee). The officers of the ‘large’ corporation (those with authority to make/act on behalf of the corporation) are typically deemed fiduciaries regardless if the appoint others as trustee. The assigned trustees are fiduciaries with the key decision makers of the company.
Beyond fiduciary, our industry often confuses the words ‘plan administrator’ of which the ‘plan administrator’ is a fiduciary. The IRS and DOL are not confused. The plan administrator has authority for the plan. Those with discretionary authority are the plan administrator. Very few recordkeeping service providers and ERISA consultants (TPA’s) are plan administrators although they perform recordkeeping administration and compliance services. The key word in relation to who is the plan administrator is ‘discretionary authority’; which in a vast majority of plans is the company.
The bottom line is the company sponsoring the plan must pay attention to the plan in all aspects!
This is a high level review of a fiduciary and plan administrator. It is important to note that the IRS and DOL do not view the platform provider, recordkeeping service provider, ERISA consultant/TPA, or custodian as a fiduciary. It is possible for any of these entities to be a fiduciary, if they are involved in discretionary authority, however it is rare.
What are the key fiduciary/plan administrator decisions?
Key fiduciary decisions include:
- Hiring of service providers (recordkeeping service provider, TPA, custodians, advisors, consultants, attorneys, etc.)
- Review and retention of these service providers
- Selection of the investment menu and ongoing review
- Selection of the plan document provider and ongoing review/retention
- Operation and administration processes/decisions (contributions, forfeitures, loan defaults, plan terminations, etc.)
- A recurring review of all fees related to the plan (this fees paid by the assets).
The fiduciary should require all service providers to provide an annual report of services provided including revenues received for services (not just fees charged to the client as some providers receive revenues from the funds that may not be disclosed).
A fiduciary is required under the exclusive purpose rule and the prudence rule to take steps to ensure that participants and beneficiaries are made aware of their rights and responsibilities with respect to the investment of assets held in their accounts. These disclosures need to be made on a regular and periodic basis, including:
- Plan Information (investment menu, eligibility, vesting, transfer availability/how-to, account information, safe harbor notifications, SAR, etc.)
- Investment Menu (including default information)
- Expenses (especially those charged to their accounts via the trust or directly to their account)
For an in-depth review of your plan or to better understand your fiduciary responsibilities, we recommend an annual fiduciary review with your ERISA consultant.
The content of this website is general in nature and is for informational purposes only. It should not be used as a substitute for specific tax, legal and/or financial advice that considers all relevant facts and circumstances.