Better Fiduciary Compliance Through Plan Governance

Fiduciary duties are central to complying with rules and regulations, and ultimately to serving participants well. A recent blog entry argues that how a plan is governed is part of the equation in fulfilling them and offers suggestions regarding how to better go about it.

“It is not hyperbole to suggest that you as a retirement plan sponsor must take seriously your fiduciary responsibility,” says PlanPILOT in “Improving Your Retirement Plan Governance,” noting that plan governance is part of fulfilling that responsibility.

Plan governance can be challenging, the blog admits; nonetheless, the writers say, given the full gamut of responsibilities a company’s leaders must fulfill, plan governance can be a low priority — and that can be at one’s peril. “This type of mentality can be detrimental for you as a plan sponsor, particularly in the wake of increasing legal liability and plan inefficiencies that raises the cost of your plan and reduces the plan’s expected return,” the entry says.

“Plan governance is an important part of a plan sponsor’s fiduciary responsibility under ERISA,” the writers assert, and it can:

• help ensure compliance and identification of deficiencies so they can be addressed before they create problems for a plan;
• lower the risk of potential liabilities resulting from breaches of fiduciary responsibility and plan disqualification;
• reduce potential operating expenses and improve financial controls;
• improve decision making; and
• provide participants with peace of mind.

To improve plan governance, the blog suggests:

Identify the following:

• all members, including individuals, committees and plan service providers;
• each role and its responsibilities; and
• all members involved in plan oversight.

Provide training on a regular basis, to new members and when responsibilities change, that:

• focuses on specific responsibilities and duties under ERISA that must be fulfilled;
• provides information on how one becomes a fiduciary; and
• stresses risks and liabilities that arise when acting as a fiduciary unintentionally.

Documents should include:

• each individual’s role and their responsibilities;
• key plan provisions, such as eligibility, contribution limits and distributions;
• updated information concerning any changes to plan operations of your plan; and
• who is responsible for coordinating compliance monitoring activities.

Monitor investment performance and plan operations.

Communications should be spelled out in the plan and incorporate basic disclosures to participants and specific mention of the necessary notifications and disclosures, and when they need to be made.

Annually review the plan.

Report about the plan on required forms, such as the Form 5500.