Retirement plan sponsors carry a significant burden of responsibility. As fiduciaries, they are entrusted with managing and overseeing retirement plans to ensure the financial security of plan participants. The fiduciary duties outlined by the Employee Retirement Income Security Act (ERISA) and further clarified by the Department of Labor (DOL) form the backbone of this responsibility.
Who is a Fiduciary?
A fiduciary is anyone who exercises discretionary control or authority over a plan’s management, administration, or assets. This includes plan sponsors, investment committee members and service providers. Identifying fiduciaries is the first step toward ensuring compliance with ERISA’s stringent standards.
Fiduciaries are required to act solely in the interest of plan participants and beneficiaries, carrying out their duties with the utmost care, skill, prudence, and diligence. Their responsibilities include:
- Plan Administration: Overseeing the day-to-day operations of the plan, ensuring compliance with plan documents, and making discretionary decisions regarding benefits and claims.
- Plan Investments: Selecting and monitoring the investment options available to plan participants, ensuring a diversified portfolio that minimizes risk.
To reduce the full burden of liability, fiduciaries can effectively outsource certain responsibilities to a retirement plan provider like the Texas Hospital Association Retirement Plan while fulfilling their duty to act prudently and in the best interests of plan participants and beneficiaries.
Retirement Plan Fiduciary Checklist1
The following list is designed to assist you in fulfilling your fiduciary responsibilities. As always, you should consult with your ERISA counsel or other experts to determine whether this list is appropriate or sufficient for your plan.
- An up-to-date plan document is being used.
- A copy of the IRS favorable determination letter and/or prototype opinion or advisory letter or other documentation supporting the tax-qualified status of the current plan document has been obtained.
- The plan document is amended for all legislatively required changes, and the plan is being operated in accordance with its terms and new legal requirements that may not yet be reflected in plan documents.
- The plan trustees have been properly appointed, and the plan’s trust agreement has been properly executed.
- All fiduciaries have been identified, and the scope of their responsibilities has been defined and documented.
- If appropriate, plan committees have been established, and appropriate members have been appointed.
- Any employee acting as a fiduciary has received sufficient training and assistance to fulfill their responsibilities in accordance with ERISA fiduciary standards of conduct.
- Service contracts exist with all plan fiduciaries and service providers that clearly outline their responsibilities.
- The plan’s service providers have provided required disclosures about their fees and services and provided timely updates of those disclosures in the event of a change.
- The fees being paid by the plan are reasonable based upon the investment options and services being provided, and conflicts of interest in the plan’s fee arrangements that could harm participants have been identified and mitigated.
- A fidelity bond is maintained that covers all persons handling plan assets.
- If deemed appropriate, fiduciary liability insurance coverage has been purchased as a protection against personal liability.
- All salary-reduction deferrals and loan repayments are being collected and invested in the plan as soon as administratively practicable.
- The plan considers following a written investment policy statement.
- Plan fiduciaries have selected a broad range of investment options and have designed an investment menu appropriate for the plan.
- Plan fiduciaries monitor the investment options periodically to ensure that the funds continue to meet the requirements set out in the plan’s investment policy statement.
- All experts and service providers are monitored periodically to ensure they are meeting the performance standards set for them.
- Meetings, including the results of any review or monitoring of investments and service providers and any decisions made with respect to the plan, are documented.
- Decisions made with respect to the investment options to be deleted or retained by the plan are well documented.
- A due diligence file is maintained and contains documentation supporting the fiduciary process and decision-making.
- You provide an up-to-date summary plan description to all employees, redistribute the summary plan description or distribute a summary of material modifications whenever plan design changes dictate, and provide summary annual reports and any required notices based on plan design.
- You provide all eligible recipients with the initial, quarterly and annual disclosures required by the participant disclosure rules and respond in a timely manner to requests for additional information.
- You provide individual benefit statements to all eligible recipients on a quarterly basis.
- You provide effective, easy-to-understand participant communications on all important aspects of the plan and educate participants about the plan, the importance of saving for retirement and the basics of investing.
- You have effective practices and procedures in place to maintain accurate contact information with all plan participants and beneficiaries, including employees who are no longer working for you.
- You have defined processes in place to locate participants and beneficiaries who are either missing or unresponsive as well as to deal with uncashed checks.
- As a best practice, you review plan success metrics, such as participation rates, salary deferral rates, investment diversification and retirement income readiness, on a periodic basis.
- As a best practice, you review and consider changes to plan design, plan services or investment products as warranted in order to improve plan success metrics.
- As a best practice, you have a process in place for ensuring the security of plan data and assets against unauthorized access or use.
- You have filed an accurately completed Form 5500 in a timely manner.
- If you are a large plan filer (generally a plan with 100 or more participants), you have included an accountant’s opinion with your report.
- You have conducted all required testing for your plan based on plan design and have addressed any testing results that require action.
- You have a process in place, which is in compliance with ERISA, to respond to participant claims against the plan.
- You comply with ERISA section 404(c), if applicable.
- If the plan utilizes a plan expense account (also referred to as an ERISA spending account), you have ensured that all payments were for allowable expenses and have determined the appropriate treatment of any assets remaining in the account.
- The plan has not engaged in any financial transaction with a party-in-interest (i.e., a fiduciary, service provider, employer, owner, employee or officer) that is not exempt.
- No plan fiduciary has used assets of the plan for their personal interests.
1 The information contained herein is for general use only, and it does not constitute legal advice upon which any party may rely. A plan sponsor is encouraged to consult its own advisors for specific guidance regarding its plan.
The Texas Hospital Association Retirement Plan is designed specifically to meet the employee retirement needs of hospitals and health care entities.
Conclusion
The fiduciary responsibility of retirement plan sponsors is a multifaceted role requiring diligence, expertise, and a proactive approach. By identifying fiduciaries, establishing clear procedures, documenting decisions, selecting and monitoring service providers, ensuring fee transparency, and managing contributions and data security, plan sponsors can fulfill their fiduciary duties effectively.
Contact the THA Retirement Plan
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