Wednesday, July 24, 2013

Fiduciary Best Practices for Retirement Plan Sponsors

The plan sponsor is ultimately responsible for all facets of the plan. With not-for-profit organizations, that responsibility resides with the governing board because there are no shareholders. While a plan must name a fiduciary(ies), a person’s title does not determine if he or she is a fiduciary—fiduciary status is based on the functions performed for the plan.

Establishing a retirement plan committee is a best practice. The board should pass a resolution delegating some of the fiduciary responsibilities to the committee, which should establish bylaws defining roles and responsibilities. Even if you are not named as a fiduciary, if you are a participant in a retirement plan committee and you have fiduciary-like duties, the U.S. Department of Labor (DOL) considers you a functional fiduciary and you have the same liabilities and responsibilities as a fiduciary.

Not every activity or every action is a fiduciary action. DOL defines three different types of activities: fiduciary, settlor, and ministerial functions.

  • The fiduciary is anyone who has discretion or control over the plan or the plan’s assets. This person selects and monitors plan investments, and can appoint other plan fiduciaries. 
  • Settlor functions are those typically related to plan design, such as establishment of a plan, determination of who the plan will cover and designing the benefit offerings. This is important because settlor functions are not subject to the same fiduciary status when making these decisions. 
  • Ministerial functions are administrative actions that do not entail any discretionary authority. The main responsibilities are to carry out what the functions of the plan document, without decision-making power.
If you have any questions about fiduciary responsibilities, or would like to begin talking to a retirement plan advisor, please get in touch by calling (855) 882-9177 or e-mail us at sbs@hanys.org.