Retirement plan fiduciaries play an important role in plan management, but they also face risks along with those responsibilities.
Mitigating those risks requires constant due diligence, proper documentation of all processes and adherence to basic conduct standards, as fiduciaries who do not follow these standards may be held personally liable for losses to the plan. They may also have to restore any profits made through improper use of plan assets.
“Ongoing due diligence, prudent processes, documentation and consistency are fiduciary best practices and will mitigate any potential areas of risk,” says Stephanie M. Spaccarelli, vice president and regional managing director at Fifth Third Bank.
Smart Business spoke with Spaccarelli about the responsibilities of fiduciaries and how to create good relationships among fiduciaries, plan providers and plan participants.
Who is considered a fiduciary?
A fiduciary is any person who exercises discretionary authority or control over the administration or management of an employee benefit plan or its assets.
The Employee Retirement Income Security Act requires that every employee benefit plan have at least one named fiduciary so that participants know who is responsible for the operation of the plan. The named fiduciary can be identified by title or by name, and could be the employer or an administrative committee appointed by the board of directors. The employer as a named fiduciary may hire outside professionals to manage some of these responsibilities.
What key things should someone be aware of when taking on fiduciary responsibilities?
Fiduciaries should be concerned about:
- Due diligence in the selection of service providers and/or consultants
- Fee and expense structures
- Oversight
- Operational and compliance procedures
These responsibilities include acting solely in the interest of plan participants and their beneficiaries.
Fiduciaries must carry out their duties prudently, follow the legal plan documents, take responsibility for diversifying their plan assets and pay only reasonable expenses.
