Plan Sponsor Quick Tips: Fiduciary Responsibilities Reminder!

Each Monday 401kBasics posts a new tip as a part of our series “Plan Sponsor Quick Tips”. This series is designed to assist plan sponsors in filling their fiduciary role and running their retirement plan efficiently. Your feedback or suggestions on future articles is welcome.

Operating a retirement plan is an important responsibility. Within the plan documents, every retirement plan will have at least one named fiduciary. However, individuals carrying out the actions needed to run that retirement plan may also be considered a fiduciary. Of importance is the fact that the fiduciary status is based on the functions performed for the plan, not just a person’s title. These significant functions include:

  • Acting in interest of participants and beneficiaries with purpose of providing benefits.
  • Prudence Duty – This area focuses on the process for making fiduciary decisions (which should be documented). There is extensive knowledge required to run a plan, hence the fiduciary will want to hire a professional.
  • Following the plan documents – Employers need to be familiar with the plan document as they serve as the foundation for plan operations. The documents should always be reviewed to make sure they remain current.
  • Plan investment diversification – Fiduciaries should diversify their entire portfolio to reduce large investment risk.
  • Paying only reasonable plan expenses.

Fiduciary responsibility should never be ignored as it could result in plan disqualification and litigation. Many fiduciaries are unaware of their role, which is based on actions, and this could be a costly oversight to a plan. Make sure to consult with your service provider for more information when in doubt.

This site is for entertainment purposes only. 401kBasics and it’s authors are not financial advisors and no information found on this site should be construed as financial advice.

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