Retirement Plan Fiduciary Responsibilities
Oct 21, 2014
Do you manage your company’s retirement plan in your day-to-day activities? Managing a retirement plan such as controlling the plan assets or using discretion in managing the plan makes you the plan fiduciary. According to the IRS, a fiduciary is a person who owes a duty of care and trust to another and must act primarily for the benefit of the other in a particular activity. Fiduciary is not just a title, but the very functions performed for the plan.
Important fiduciary responsibilities include: – Acting solely in the interest of the participants and their beneficiaries – Acting exclusive purpose of providing benefits to workers participating in the plan and their beneficiaries, and defraying reasonable expenses of the plan – Following the plan documents (unless inconsistent with ERISA) – Diversifying plan investments – Carrying out your duties as a fiduciary prudently, with care, and diligence
The Employee Retirement Income Security Act, also known as ERISA, set standards of conduct for those who manage employee benefit plans and its assets. It is important for the fiduciary to follow through with their responsibilities because they act on behalf of the participants in the retirement plan and their beneficiaries. According to the Department of Labor (DOL), the significance of being a fiduciary is acting solely in the interest of plan participants and their beneficiaries, with the exclusive purpose of providing benefits to them.
Carrying out duties prudently is one of a fiduciary’s central responsibilities under ERISA. In other words, a fiduciary should have knowledge and expertise in a variety of functions necessary to operate the plan. It is recommended to consult experts in accounting and investments to assist in carrying out your fiduciary responsibilities the best that you can.
It goes without saying, the responsibility of being a fiduciary should not be taken lightly. It is a big responsibility and often times businesses hire someone to act as their fiduciary to handle the responsibilities set forth above. Even if you hire a financial institution or retirement plan professional to manage your plan, you retain some fiduciary responsibility for the decision to select and keep the service provider. You should document your selection process and monitor the services provided to determine if you need to make a change.
By: Aubrey Forche, Staff Accountant