FIDUCIARY RESPONSIBILITY PLAN INVESTMENTS

Full text

(1)

Barbara Appleby, JD, MA, AIF® Kristin Guibord, MBA, AIF®

KNOW YOUR PLAN RESPONSIBILITIES

FIDUCIARY RESPONSIBILITY

PLAN INVESTMENTS

(2)

TOPICS OF DISCUSSION

1. Who is a plan fiduciary?

2. What are the fiduciary’s responsibilities? • Overall

• Plan Investments

(3)

FIDUCIARY RESPONSIBILITY

Who is a Fiduciary?

“Fiduciary by Title” • Named fiduciary • Trustee “Fiduciary by Act”

• Anyone who exercises any discretionary authority or control with respect to the management of the plan or its assets, or in the administration of the plan.

(4)

FIDUCIARY RESPONSIBILITY

Responsibilities of a Plan Fiduciary.

ACT PRUDENTLY ACT WITH LOYALTY FOLLOW PLAN DOCUMENTS DIVERSIFY INVESTMENTS KEEP FEES REASONABLE

(5)

FIDUCIARY BEST PRACTICES

Establish an Investment Committee

• Not a legal requirement, but support the requirement for procedural prudence.

• Members have experience and expertise in investment matters.

• Members with less investment expertise, but perspective on the nature and needs of the workforce.

• Consider the time commitment and the willingness of potential members when making member selections.

(6)

FIDUCIARY BEST PRACTICES

Adopt an Investment Policy Statement (IPS)

• Provides guidelines and policy direction for selection and monitoring of investment options and service providers. • Defines which asset classes will be offered in the plan and

intent to offer a diverse range of investments.

• Defines criteria for evaluating and selection of investment options.

• Identifies benchmarks used for performance review of investments.

• States frequency of and process for review of investments.

(7)

FIDUCIARY BEST PRACTICES

Implement Investment Process

• Select investments in accordance with Investment Policy Statement.

• Conduct annual meeting for in-depth review of investment performance and overall investment lineup.

• Use criteria identified in the IPS to add or replace investment.

• Conduct check-up meetings to monitor fund performance.

• Document all meetings and decisions and maintain a file.

(8)

FIDUCIARY BEST PRACTICES

Ensure Compliance with ERISA 404(c)

404(c) provides that “if a plan gives participants direct control over their assets, plan fiduciaries may be relieved from potential liability for losses resulting from participants’ investment decisions.”

(9)

FIDUCIARY BEST PRACTICES

Ensure Compliance with ERISA 404(c)

Basic requirements under 404(c)

• Must offer a “broad range of investment

alternatives” (at least 3) with materially different risk and return profiles.

• Participants must be able to change their

investments with frequency appropriate in light of the volatility of the investment options.

(10)

FIDUCIARY BEST PRACTICES

Provide Education and Advice to Participants

• Participant education is NOT a duty of a plan fiduciary.

HOWEVER

• Promoting participant success in achieving retirement goals is an element of “procedural” prudence required by fiduciaries.

(11)

FIDUCIARY BEST PRACTICES

Provide Education and Advice to Participants,

Continued

Education versus Advice

• Goals are the same: Lead participants to diversify their accounts according to the asset allocation strategy best for them.

• Key difference: Giving investment advice is a fiduciary act. Giving investment education is not.

What constitutes advice?

Gathering personal information about a participant’s situation, needs and goals in order to advise them on a particular course of action.

(12)

FIDUCIARY BEST PRACTICES

Utilize, select and monitor outside experts

• Goal is to promote procedural prudence by filling gaps in the fiduciaries’ expertise and provides for an

independent informed expert’s view.

• ERISA encourages the use of outside consultants.

• May include investment professional, lawyer, auditor, or consultants.

• Selection criteria should include expertise, credentials, references and fees.

(13)

FIDUCIARY BEST PRACTICES

Good Fiduciary Habits are all about PROCESS

Old adage: “Prudence is process”

Even better might be…

• “Prudence is process – but only if you can prove it.”

• Having a process you consistently follow and document is more important than making the “right decision.”

(14)

FIDUCIARY BEST PRACTICES

Reference Material and Guides:

U.S. Department of Labor:

www.dol.gov/ebsa/publications/fiduciaryresponsibility.html Check with your 401k Platform provider. Some have very well-produced and easy-to-understand guides written for plan fiduciaries.

(15)

CONTACT INFORMATION

We are always available for your questions.

Barbara Appleby, JD, MA, AIF ®

bappleby@berrydunnwm.com

207.541.2306

Kristin Guibord, MBA, AIF®

kguibord@berrydunnwm.com

207.541.2232

Figure

Updating...

References

Updating...

Related subjects :