Being a Fiduciary

According to the Department of Labor, a fiduciary is “a person or entity that uses discretion in administering and managing a plan or controlling the plans assets”. This definition is very broad and can encompass a number of different people and service providers connected to a company’s qualified retirement planning. Because of this broad definition, anyone other than professionals such as attorneys and accountants who are involved in carrying out or implementing parts of a company’s qualified planning can be considered a fiduciary.

The broad role of any fiduciary is to act prudently and in the best interest of the plan and the participants. While acting in the best interests of employees may sometimes mean exposing apparent conflicts of interest, the actions of a fiduciary must benefit the participants over and above anyone else involved.

The day-to-day roles of a fiduciary are to follow the rules of the plan documents. These items will include basics like notifying employees when they become eligible. It will also entail more involved things such as reviewing the plan on a regular basis to see if plan assets are properly diversified and if the service providers such as investment companies, record keepers and third party administrators are carrying out their functions correctly and in a cost efficient manner.

While fiduciaries have responsibilities for which they are accountable, certain steps can be taken to limit some of the liability. For example, allowing participants to pick their own portfolio does give fiduciaries some protection. With that said, the fiduciaries are still required to monitor the investments or investment providers to see if the choices continue to be prudent options for the employees. A good question for any employer to ask themselves would be “is the plan we are offering the employees properly diversified, competitively priced and following the rules of the plan document?” Even when that is clear, it is important fiduciaries also consider a secondary question: “How do you know this is the case and do you have a consistent and documented process to be able to prove this when necessary?”

Employers and corporate fiduciaries’ ability to understand and answer these questions are critical to the fulfillment of the fiduciary responsibility. To help address these questions, consider engaging a Trilogy Advisor familiar with the Global Fiduciary Standards of Care.

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