COLLECTED WISDOM™ on Fiduciary Responsibility and Liability Issues

This archive contains not only the most current material on the topic, but also older items that are still relevant, provide background, perspective or are germane to the topic.

If you find a broken link or an items that you feel is outdate, irrelevant or no longer appropriate, please let us know.

Other topical areas you may find of interest that are not fully covered here include ERISA 404(c) Compliance and Fiduciary Duty, 401k Investment Committees, Fiduciary Related News and Intelligence, and DOL's Final Fiduciary Rule and Best Interests Contract Requirement.

Peeling Back the Fiduciary Layers and Unscrambling the Fiduciary Confusion

In seeking clarity about the "type" of 401k professional it has retained, plan sponsors often find the answers they are given to be incoherent with a slant in favor of the 401k industry instead of plan participants. The residual fuzziness plan sponsors are left feeling about this topic is a source of significant irritation to them. This comprehensive article attempts to peel back the fiduciary layers and unscramble the fiduciary fuzziness.

Source: 401khelpcenter.com

The Sixth Circuit Decision Allows a Performance Standard to Judge the Fiduciary Prudence of 401k Plan Investment Decisions

The Sixth Circuit's Parker-Hannifin decision permits claims of fiduciary breach for investment underperformance after just eleven months, even without a meaningful benchmark to assess prudence. Plaintiffs have compared Northern Trust's conservative strategy to higher-risk, top-performing funds. The article notes that if upheld, fiduciaries could be liable for failing to select top performers or exceed the S&P 500, regardless of their actual investment strategy. The dissent argues that ERISA sets "standards of conduct, not standards of performance," indicating that this ruling could lead to speculative class action lawsuits based on unrealistic performance expectations.

Source: Encorefiduciary.com, December 2024

2024 Mid-Year Fiduciary Update for Private Sector Employers: Webinar

This 2024 Mid-Year Fiduciary Update Webinar for private-sector employers took place on Wednesday, August 28, 2024. Here are the presentation slides and full video from the session. The agenda includes SECURE Act 2.0 fiduciary issues, an update on fiduciary breach litigation, an update on general fiduciary issues, and an annual review of plan documents and operational compliance.

Source: Hansonbridgett.com, September 2024

What Every Fiduciary Should Know About a Self-Directed Brokerage Account

While SDBAs have been around for a long time, plan fiduciaries often have questions about their fiduciary responsibilities under ERISA concerning SDBAs. Unfortunately, there is limited clear guidance addressing the broad array of issues facing plan fiduciaries. To help clear up some confusion regarding the fiduciary considerations of including an SDBA within a retirement plan, this 8-page paper provides answers to some common and pressing issues in this evolving area of the retirement services industry.

Source: Schwab.com, September 2024

How to Reduce Your ERISA Risks, and the Role of Fiduciary Liability Insurance

Groom Law Group's Lars Golumbic, co-chair of the firm's Litigation group, discusses the escalating litigation risks that retirement and health and welfare plan sponsors and fiduciaries have faced in recent years in this report. The report, prepared for Chubb, details the responsibilities of fiduciaries under ERISA, the types of litigation that could be brought against them, and how fiduciaries might mitigate the risk of litigation.

Source: Groom.com, August 2024

Plan Governance: Plan Sponsor vs. Fiduciary and Committee Roles and Responsibilities

Depending on the size of your company, who is responsible for retirement plan oversight may be only the owner of a small business or there may be specific teams or committees assigned to tasks in larger entities. Certain parties will inevitably wear multiple hats, acting on behalf of the employer and of the plan as a fiduciary. The roles of the plan sponsor and the plan fiduciaries can be hard to distinguish and, in certain functions, can overlap. This article will help you decipher just who is responsible for what so that an effective governance structure can be developed and maintained.

Source: Newfront.com, July 2024

Experts Outline Strategies for Investment Menu Design

Developing and maintaining a plan's investment menu is a key fiduciary responsibility. Industry experts offer their insights into factors and steps to consider in performing that function. In a Plan Sponsor Council of America webcast "The Art and Science of Investment Menu Design," experts offered their insights on strategies for designing an investment menu that will best serve participants and address their needs and concerns.

Source: Asppa.org, July 2024

"Fiduciary" Is the Best Practice 401k Plan Sponsors Can No Longer Ignore

"A plan sponsor's paramount responsibility is to ensure the effectiveness and compliance of their 401k plan," says Richard Bavetz, investment advisor at Carington Financial in Westlake Village California. "In light of evolving regulatory landscapes, technological advancements, and participant needs, revisiting best practices can help safeguard the interests of both sponsors and participants." At the head of the 401k best practices list, especially considering the latest DOL initiatives, is a concept often underestimated by 401k plan sponsors.

Source: Fiduciarynews.com, July 2024

DOL Releases New ERISA Fiduciary Rule

The DOL on April 23, 2024, issued the Retirement Security Rule, which expands who qualifies as an investment advice fiduciary for purposes of ERISA. Under the ERISA fiduciary rules currently in effect, there is a plethora of investment professionals who are not subject to ERISA's fiduciary safeguards. The DOL indicated that the new rule and amended PTEs will close the loopholes that permitted certain investment professionals to avoid ERISA's fiduciary standards.

Source: Hklaw.com, June 2024

Are You a Fiduciary? The New Definition of an Investment Advice Fiduciary

This article addresses the definition of an "investment advice fiduciary" under ERISA, the DOL's official interpretation of the definition from 1975 through 2024, the policies underlying the DOL's transition to the new Retirement Security Rule, the requirements of the rule, and the impact thereof on businesses, investors, and plan sponsors. The article also examines the Retirement Security Rule's chance of survival in the face of current legal challenges.

Source: Bsk.com, June 2024

ERISA Bond: What Is It and do I Need One?

Almost every sponsor of every tax-qualified retirement plan must obtain a fidelity bond under section 412 of ERISA. Despite the broad application of this requirement, a surprising number of plan sponsors are unaware of this requirement and do not have a bond at all or do not have a bond in the proper amount. This article will help explain the requirements.

Source: Legacyrsllc.com, June 2024

Fiduciary Fee Study

When fees are taken from 401k participant accounts, they directly decrease returns, resulting in less money available to grow over time. These fees can ultimately reduce a worker's retirement savings by hundreds of thousands of dollars and mitigate the success of offering a workplace plan. Fiduciary-grade investment advice can reduce the expenses of administering a 401k plan, including those of small businesses, according to a data deep-dive by Employee Fiduciary, LLC.

Source: Planadviser.com, June 2024

DOL's Retirement Security Rule: Six Things Advisors Should Know

In April 2024, the DOL issued the final version of its Retirement Security Rule which imposes an ERISA fiduciary standard. Staying informed about and compliant with the new Rule is crucial for financial professionals to uphold ethical standards, maintain client trust, and operate successfully within the industry. Here are some questions and answers to help break down some of the key changes as well as a checklist to aid in complying with the new rule.

Source: Manning-Napier.com, June 2024

Why Retirement Plan Sponsors and Fiduciaries Need to Know about the SEC Cybersecurity Amendments

On May 15, 2024, the SEC adopted amendments to Regulation S-P which governs the treatment of nonpublic personal information about consumers by certain financial institutions, many of which are commonly vendors and service providers to retirement plans. When assessing the cybersecurity of a retirement plan service provider that is a financial institution, plan fiduciaries may want to be aware of these SEC requirements as part of their assessment process.

Source: Workplaceprivacyreport.com, May 2024

Study Reveals How Fiduciary Advice Reduces 401k Plan Costs

Employee Fiduciary has released its latest 401k advisor fee study. The study highlights how fiduciary-grade investment advice can lower the cost of small business 401k plans, making retirement more affordable for plan participants. The study looks at the fees charged by 1,109 fiduciary-grade financial advisors to demonstrate how affordable a small business 401k plan can be with fiduciary-grade investment advice.

Source: Prnewswire.com, May 2024

Six Steps to a Strong Missing Participant Policy

Missing participants, defined as individuals who have become disconnected from their retirement savings are a significant challenge that has long plagued defined contribution plans. The responsibility for locating these persons falls squarely on the shoulders of plan sponsors. Retirement Clearinghouse's Tom Hawkins shares keys to building a policy that will fulfill a plan sponsor's fiduciary duty.

Source: 401kspecialistmag.com, May 2024

Breaking Down ERISA Section 404(c) to the Basics

Although retirement plan participants have the freedom to make their own investment decisions, plan fiduciaries are still responsible for providing a wide range of diversified investment options for them to choose from. Fortunately, however, fiduciaries are protected by ERISA Section 404(c), a provision that shields plan sponsors from employees' poor investment choices. What are the requirements under 404(c)?

Source: Plansponsor.com, May 2024

Advisor RFPs: The Ultimate Guide (Webinar Recording)

As a retirement plan sponsor, advisor requests for proposals are a necessary part of fulfilling your fiduciary duty. They can also present a valuable opportunity to expand or change your retirement plan offerings. However, it's no secret that the RFP process can be daunting. In this webinar recording, CAPTRUST presents a step-by-step guide to aid you in planning, preparing, and executing this important body of work.

Source: Captrust.com, April 2024

What It Means to Be an ERISA Fiduciary

ERISA's definition of fiduciary encompasses three categories of responsibility or activities concerning an employee benefit plan. In addition to anyone who is specifically named as a fiduciary by the terms of a plan, a person is a fiduciary of a plan to the extent they exercise certain discretionary authority or responsibility. Here is an overview.

Source: Employeebenefitslawgroup.com, April 2024

Investment Menus and Fiduciary Considerations

Plan Sponsors have a fiduciary duty to select and monitor investments in a retirement plan. Ensuring that an investment menu is cost-efficient and appropriate for the given employee population is a large component of this responsibility. The wide array of available investment options and complex fiduciary requirements can make this challenging. In particular, it may be difficult to determine whether adding a new trending asset class makes sense for a retirement plan and its participants, or whether it is more prudent to steer clear.

Source: Spconsultants.com, April 2024

Understanding Investments and Fees: A Key Part of Plan Committee Education

As retirement plan litigation has become more commonplace, plan committee members need to be prepared to defend themselves in case they are ever in a court situation. Many retirement plan lawsuits involve questions regarding plan investment and other fees, as well as the reasonableness of those fees. Therefore, educating plan committee members about investments and the importance of benchmarking investments and costs is a crucial part of fiduciary training, experts say.

Source: Plansponsor.com, February 2024

Hiring an ERISA 3(16) Plan Administrator

This guide is designed to shed light on the crucial aspects of understanding your fiduciary responsibilities, how a 3(16) plan administrator can help you, as well as mitigate risks. While this choice may not be right for every retirement plan, it could be of tremendous value to those wishing to add support to their plans while mitigating risks and seeking to improve the financial well-being of plan participants.

Source: Planpilot.com, February 2024

How to Teach Fiduciary Responsibility to Plan Committees

Sponsors of retirement plans, especially those covered by ERISA, must ensure their retirement plan committee members are trained to understand and execute their fiduciary duties. To do so, plans find fiduciary education and training from regulators, existing providers, and a wide variety of sources.

Source: Plansponsor.com, February 2024

When and Why a Second Retirement Plan Committee Makes Sense

Designing a retirement plan structure that ensures efficient decision-making and smooth execution of initiatives is crucial for employers, but that ideal plan structure depends on many factors, including an organization's size and needs. While some organizations have a single retirement committee that covers decisions about the plan's investments and administrative matters, others divide the tasks among two committees.

Source: Plansponsor.com, February 2024

Maintaining Successful Committee Requires Continuous Education, Right People

Members of a retirement plan committee serve a critical role in the decision-making process of any company's benefits program, from investment lineup decisions to provider partnerships and, ultimately, upholding ERISA. Not only are committee members key decision-makers, but they are also fiduciaries and must ensure prudent management of the plan. As a result, ongoing education and training for plan committee members are vital, as they must understand the requirements of ERISA, litigation trends, the importance of documentation, and much more.

Source: Plansponsor.com, February 2024

Plan Sponsors Should Be Intentional When Adding Managed Accounts

Managed accounts are growing in popularity. According to data from retirement consultant Mercer, 48.8% of defined contribution plans offer a managed account solution to plan participants, a figure that has grown by 9% over the past five years. Despite the uptake in adoption, there are still many questions that have to be answered to implement a managed account offering effectively and to be able to measure it over time.

Source: Plansponsor.com, January 2024

A Comprehensive Guide to the 401k RFP Process

As a plan fiduciary, you need to choose the right 401k providers to ensure the financial well-being of your employees. You must undertake a thorough Request for Proposal process to do so. The RFP will help you evaluate and compare providers based on their track record, services, fees, and other critical factors. By following a well-crafted 401k RFP process, you can establish a successful and beneficial retirement savings program that meets the diverse needs of your employees. Here is a guide to the RFP process.

Source: Cuiwealth.com, January 2024

Hiring an Independent Fiduciary for a 401k Plan Company Stock Fund

This document summarizes some common questions that plan sponsors and plan committees ask when considering whether to appoint a discretionary independent fiduciary and investment manager for a 401k plan company stock fund.

Source: Newportgroup.com, December 2023

Crypto Remains Massive Compliance Risk for Retirement Fiduciaries

On November 20, the Securities and Exchange Commission charged Kraken, a crypto exchange, for operating as an unregistered securities exchange. This prompted Wagner Law Group partner Kimberly Shaw Elliott to caution fiduciaries of the risks of crypto assets, given their compliance issues. The Department of the Treasury issued a record-breaking multi-billion dollar fine against Binance Holdings Ltd., a crypto exchange, the next day, further compounding the fiduciary risks of crypto assets.

Source: Planadviser.com, November 2023

Investment Committee Best Practices: If a Prudent Decision Was Made and No One Documented it, Did it Happen?

Engaging in prudent behavior is only the first step a plan fiduciary should take, however. Equally important is for the plan fiduciary to be able to demonstrate at a future date when that decision-making process might be called into question that the fiduciary engaged in a prudent process. This article provides some recommendations and insights on committee best practices.

Source: Graydon.law, October 2023

Understanding Excessive Fee Litigation Risk in Retirement Plans

Plaintiff firms continue to be creative in bringing forth fiduciary claims against organizations and those who oversee their retirement programs. It's not enough to just have the right insurance coverage. Organizations need to institute the right internal governance processes to manage their fiduciary liabilities and risks.

Source: Newfront.com, October 2023

ERISA Section 3(21)(A) and Discretion

In this 13-page article, the author explains that fiduciary status under ERISA does not hinge on the exercise of discretion in some cases because, under ERISA Section 3(21)(A), an entity that exercises any authority or control over the disposition of plan assets becomes a fiduciary.

Source: Wagnerlawgroup.com, October 2023

The Ins and Outs of Fiduciary Liability Insurance

An explanation and history of fiduciary liability insurance occurred at the ERISA 403b Conference in Washington, D.C. While fiduciary liability insurance initially covered individuals, no one thought it was for a plan or company. It changed in the 1990s and today, fiduciary liability insurance is malpractice insurance for fiduciaries and it generally covers four areas.

Source: Napa-net.org, October 2023

Retirement Plan Investment Menu: Taking a look Into the Industry Average

Plan Sponsors want to know how their menu looks compared to peers. There are two primary reasons for this. First, a retirement plan is used as a retention tool and sponsors want to make sure they are competitive with their offering. Second, sponsors have a fiduciary responsibility and want to be in line with industry standards. This article highlights a few aspects of the menu that are not only interesting but important considerations for a fiduciary.

Source: Conradsiegel.com, September 2023

Retirement Plan Fees Worsen Enterprise Risk: A Management Briefing

A crisis among retirement plan-sponsoring enterprises is unfolding. The challenge facing their leaders is to ensure that operations managers are equipped with the training, guidelines, controls, and tools that elevate fiduciary risk management to its proper priority. Underestimating the economic and reputational risks related to deficiencies in the prudent management of ERISA plans threatens an entire enterprise.

Source: Rolandcriss.com, September 2023

MOVEit Cyberattack Ignites Worry About Fiduciary Responsibility

If there's one big takeaway for plan sponsors following the massive MOVEit cyberattack that breached the personal data of millions of participants in public pension and private-sector workplace retirement plans, it's this: They may need to rewrite their vendor contracts and redouble their monitoring of service providers. While no sponsors have yet been sued, it's not far-fetched to think that they could be, according to legal experts.

Source: Pionline.com, August 2023

Exploring and Understanding What It Means to Be a Fiduciary

Do you understand what it means to be an ERISA fiduciary and the associated responsibilities? Did you know that the DOL requires employers to educate retirement plan committee members on their roles and responsibilities? This recording helps build a strong foundation for understanding what is required of plan fiduciaries.

Source: Multnomahgroup.com, August 2023

What You Need to Avoid in Hiring Providers as 401k Fiduciaries

A plan sponsor has so many things to do in running a business that they often forget that as a 401k plan sponsor, they are also a fiduciary. So to eliminate some of the burdens, a plan sponsor may want to hire a plan provider that will lessen the burden by serving in a fiduciary capacity. This article is all about the things to avoid when considering hiring plan providers as plan fiduciaries.

Source: Jdsupra.com, July 2023

What is a 401k Fiduciary: Key Responsibilities & Dutie

This guide explains everything you need to know about being a 401k fiduciary. This includes understanding your legal responsibilities and finding ways to reduce your liability and make compliance easier for your plan.

Source: Forusall.com, July 2023

A Model for Managing Fiduciary Risk

A critical legal duty accompanies the responsibility of employers to manage employee benefit plans fairly and safely. Tactics for managing the associated risks are not intuitive and pose a significant challenge for the typical executives who populate a plan management committee. Risk management is often left for others in an enterprise to consider, but current events mandate a change in thinking and action. A framework of standardized procedures is needed.

Source: Rolandcriss.com, June 2023

Achieving Fiduciary Excellence

In today's increasingly competitive environment, more advisory firms are seeking to differentiate themselves and grow AUM by formalizing their commitment to fiduciary excellence. 139 investment advisory firms from around the world have done just that, achieving certification by the Centre for Fiduciary Excellence. This report provides an inside look at how those advisory firms operate their practices.

Source: Broadridge.com, June 2023

The Who, When and Why of Independent Fiduciaries

Employee benefit plan sponsors may need to hire an independent fiduciary in certain situations to avoid conflicts of interest and prohibited transactions under ERISA. What is an independent fiduciary, and when might a plan need one?

Source: Wagnerlawgroup.com, May 2023

Fiduciaries Must Revisit ERISA Origins

ERISA was created with important protections for plan fiduciaries who are judged as prudent experts under ERISA's fiduciary standard of care. In this article published May 24, 2023, by Law360, ERISA attorney Jeff Mamorsky explores the history of ERISA and why the underpinnings of ERISA are more important than ever.

Source: Cohenbuckmann.com, May 2023

DCIIA Publishes Guide to Fiduciary Models

The Defined Contribution Institutional Investment Association published this month a governance model guide for plan sponsors, "Defined Contribution Plan Governance Models: A Guide for Plan Sponsors." The guide outlines governance and fiduciary structures that plan sponsors can elect to fit their plan's needs.

Source: Planadviser.com, April 2023

Are BlackRock's Target-Date Funds the New Fiduciary Battlefield?

A new wave of lawsuits focuses on the alleged underperformance of certain TDFs that many plan sponsors use as their plan's default investment option. In these most recent cases, each of the defendants offered the Blackrock TDFs as the default investments in their DC retirement plans. These new lawsuits allege that investment returns were sacrificed in favor of plan sponsors chasing low fees. The claims are largely that the BlackRock TDFs are inappropriate for institutional plans and that fiduciaries were not prudent in selecting these lower-cost investment options.

Source: Icemiller.com, April 2023

Missing Participants? Search Efforts Are a Fiduciary Duty

Finding missing retirement plan participants is an ongoing -- and necessary -- challenge for employers. Whether your organization offers a defined contribution or a defined benefit pension plan, you have a fiduciary duty to find missing participants.

Source: Usicg.com, April 2023

Principled Performance Drives Fiduciary Excellence

Principled Performance is an approach to the fiduciary role by which managers reliably achieve objectives, address uncertainty, and act with integrity on behalf of the employees and their beneficiaries who participate in employee benefit plans.

Source: Rolandcriss.com, April 2023

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