Fiduciary Responsibility Tips for Trustees

Fiduciary Responsibility Tips for Trustees

In a time when many people tend to avoid accountability at all cost, retirement plan trustees cannot shirk their responsibility to execute their fiduciary duty over the plan they administer.

The following are some methods that trustees can employ to satisfy their fiduciary responsibility:

Form a committee

The old adage, “there is strength in numbers,” certainly holds true in this case. A committee of three or more individuals should be formed so that together they can oversee the plan to ensure that it is operating in accordance with the plan document. A single person can easily let something slip by unnoticed, despite the best of intentions. Having multiple sets of eyes on the plan is clearly advisable. It is important to document the actions of any committee through the use of minutes or resolutions. Use this as a rule of thumb: “If it wasn’t documented, it wasn’t done.”

Hire an “investment watchdog”

Among a plan fiduciary’s responsibilities is to choose and monitor investment choices available to plan participants. Unless you are a registered investment advisor, choices you make could easily be called into question if the chosen investments do not perform as you hoped. Thankfully, most “bundled” plans offer this service as part of the bundle.

Make sure you are bonded AND insured

Most all plan fiduciaries are aware that plans must have a fidelity bond, but they may not be aware that they can, and should, also have fiduciary liability insurance (“FLI”). The Employee Retirement Income Security Act (“ERISA”) requires plans to have a fidelity bond, but it does not require plans to have FLI. The maximum required fidelity bond for most plans is set at $500,000. With the balances seen in many plans these days, this amount may fall well short of a fiduciary’s real exposure. FLI can help mitigate that exposure.

These are some important measures that retirement plan trustees can take to ensure they have appropriately mitigated their risk of breach of fiduciary duty. Another important step to take is to rely on the A-team: attorneys, accountants and actuaries. Using the right professionals can help a plan fiduciary sleep better at night, knowing that his or her duty has been met.

Erdmann-Al Alfred Erdmann, CPA, MS, Partner
[email protected]
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