Managing Your Fiduciary Responsibility
As a plan sponsor, your job requires that you wear a lot of hats. No doubt, that brings up questions about your key responsibilities, including your fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA). This Q&A provides an overview of some of the major obligations and considerations under the ERISA fiduciary duty rules.
What is the ERISA?
ERISA is a federal law that sets minimum standards for many voluntarily established retirement savings plans and provides protection for individuals participating in these plans. Get more information on ERISA's requirements in the Managing Your Fiduciary Responsibility brochure.
Who is an ERISA fiduciary?
Who is an ERISA fiduciary?
What are some of a plan sponsor's key fiduciary responsibilities?
Under ERISA, a plan sponsor must execute all fiduciary responsibilities with the care, skill and diligence of a "prudent" person acting in a similar capacity; make fiduciary decisions in the sole interest of participants and beneficiaries; select a diverse range of investments; monitor for ERISA prohibited transactions; respond to all participant inquiries in a timely manner; follow the plan documents; and ensure a fidelity bond covers the plan assets in accordance with ERISA rules.
What are ERISA's requirements in regards to maintaining plan records?
ERISA requires that plan administrators maintain all records necessary to document the accuracy of information contained in any ERISA-required report, such as the Form 5500. ERISA requires that records be kept for a period of six years after the filing date of the Form 5500 created from those records. For other items, plan administrators and plan sponsors should consult legal counsel when designing record retention guidelines.
What are some ways you can minimize fiduciary risk?
As a plan sponsor, one of the keys is to follow a process that ensures decisions are well informed and consistent with the plan's objectives. ERISA requires that plan administrators maintain all records necessary to document the accuracy of information contained in any ERISA-required report, such as the Form 5500. ERISA requires that records be kept for a period of six years after the filing date of the Form 5500 created from those records. For other items, plan administrators and plan sponsors should consult legal counsel when designing record retention guidelines.
Examples of proper documentation that help demonstrate your due diligence are:
- Investment Policy Statement (IPS)
- Plan documents and amendments, Summary Plan Descriptions (SPDs) and other required disclosures, board resolutions, etc.
- Reports provided by investment managers, record keepers, service providers or others
- Discrimination test results, signed Form 5500s, compliance documentation
- Plan communications to employees
- Proof of fidelity bond