What Is The Plan Sponsor’s Fiduciary Responsibility When A Service Is Contracted To A Third Party Provider?

What Is The Plan Sponsor’s Fiduciary Responsibility When A Service Is Contracted To A Third Party Provider?

• When choosing a service provider, consider the following:
  • When evaluating multiple providers, compare the benefits offered and related fees prior to making a selection as to which service provider is the best choice for your plan.
  • Using a provider which has an annual Type II SAS 70 Audit performed on their internal controls and obtains a SAS 70 Report.
  • Review SAS 70 reports for exceptions and user control considerations identified in the SAS 70 report, which identify controls and procedures required to be in place at the plan sponsor. The plan sponsor should review their own controls and procedures to determine that they have appropriate user controls in place when using the proposed service provider.
  • Document the decision process to support the selection of a specific service provider.
• Monitoring the performance of contracted services providers should be documented on an ongoing basis and should include the following:
  • Verify the custodian of assets has the appropriate fidelity bond.
  • Periodic (monthly, quarterly) review of reports generated for the plan and participants.
  • Review of fees charged to the plan and evaluate for reasonableness. The fiduciary has the responsibility to have the plan and its participants pay only reasonable fees to maximize the total investment returns for the participants.
  • Review the recorded activities of the plan to determine if the plan is being administered in compliance with the plan document.
  • Review the plan reports from the record keeper for any potential prohibited transactions.
  • Review the results of the nondiscrimination tests performed and authorize the record keeper to take the appropriate steps necessary to pass such tests, if applicable.
  • Investigate participant complaints (if any).
  • Review the annual Type II SAS 70 audit report to determine if the service provider’s auditors issued a clean opinion. Note any changes in the user control considerations.
  • Periodic consideration of changing providers.

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The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals for your plan’s individual facts and circumstances.

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