In order to help you manage your fiduciary responsibilities as a retirement plan sponsor, you should start by understanding your role and the rules. Plan administrators and other plan officials can use this questionnaire to assess you and your plan’s compliance. Keep in mind, this assessment is not a substitute for a comprehensive compliance review.
If you answer “No” to any of the questions below, you should review your plan’s operations because you may not be in full compliance with ERISA’s requirements.
Has a fiduciary or group of fiduciaries been named for the plan and have the fiduciary obligations under ERISA been communicated?
A fiduciary is anyone who:
-has authority under the plan to manage plan investments or who actually exercises control over those investments.
-gives advice about plan investments for a fee.
-has discretionary authority for the administration of the plan.
There are two types of fiduciaries: named fiduciaries (including appointed fiduciaries) and functional fiduciaries. The distinction is important.
A named fiduciary is a person or committee who is given fiduciary responsibility by the terms of a plan. This process of naming fiduciaries should be documented and maintained by the plan sponsor.
A functional fiduciary is someone who is not authorized by the plan document to manage the plan or its assets, but who in fact exercises discretionary control over the administration of the plan or the handling of its investments.
Does your plan have a written investment policy statement (IPS)?
An IPS is the documented “road map” on how you select the investment options you make available to your plan participants. At least one federal court has concluded that, based on the facts of the case, the failure of the plan fiduciaries to have an IPS was a breach of ERISA’s general fiduciary rules. However, currently there is no explicit requirement in ERISA that an IPS be prepared. At a minimum, it should be viewed as a prudent fiduciary practice to prepare an IPS.
Is there a fiduciary committee that meets on a regular basis to discuss:
–the investment performance of each fund?
Performance criteria for selection and monitoring investments should include:
-the performance of the investments over one, three, five, and ten-year periods as compared to the appropriate index and/or to the peer group,
-the expense ratio of each fund compared to the average expense ratio of the funds in its -peer group, and
the tenure of the manager and the stability of the staff at the investment management firm.
–whether or not to take action regarding a specific investment as specified in the terms of the IPS?
A failure to follow the terms of the IPS is a fiduciary breach.
–participant educational needs?
ERISA requires that fiduciaries evaluate the providers of investment education, understand the content and delivery of those services, and monitor the effectiveness and quality of the educational resources available to participants
Will the service provider supply independent benchmarking reports at its own expense to show the cost and quality of services are aligned with the industry?
Every three to four years, it is a best practice for plan sponsors to confirm their understanding of their plan’s investments and to verify their plan’s pricing is still competitive. Your plan provider should be able to assist you in not only understanding how your plan fees are structured, but also how they rank compared to industry averages.
Understanding retirement plan pricing can be difficult because a fee can be billed and/or included in your plan investment expenses or performance. The Department of Labor has provided a fee disclosure template which may be useful in helping you understand the overall pricing of your plan.
Once you understand your fee structure, it is imperative you also assess whether the service value provided for that cost is adequately meeting the needs of both you as a plan sponsor as well as your plan participants. The lowest priced plan may not include the high-value service that you need.
Do you maintain a due diligence documentation file?
The plan should have a due diligence file for the selection of each provider and adviser, including all the information reviewed and the contract with the provider. In addition, the plan should have a separate file for each plan year for the ongoing monitoring of the operation and investments. Plan records should be kept for at least 6 years.
Fiduciaries understand prohibited transaction rules and are not involved in self-dealing?
The prohibited transaction rules forbid certain transactions with persons and entities that are closely related to the plan (“parties in interest”). In addition, they specifically prohibit self-dealing transactions by the fiduciaries.
Have you provided plan participants with the following documents:
-Summary Plan Description (SPD)?
-Summaries of any Material Modifications (SMM)?
-404(a)(5) Participant fee disclosures?
-Safe Harbor or other required notices?
Providing information to your plan participants is an important part of your fiduciary duties. Your plan provider should make these documents easily accessible so you can provide printed or electronic copies to your participants.
If the plan currently seeks protection under ERISA 404(c), have plan participants been given written notice that they can direct their own investments and that the plan intends to meet the requirements of ERISA 404(c), which limits plan fiduciaries’ potential liability for participant investment decisions?
Taking advantage of some of the fiduciary protection offered by ERISA law is generally considered a best practice. Although your plan fiduciaries will still be responsible for the investments selected for your plan, individual participants bear the responsibility for how they decide to allocate their contributions among your plan’s investment options.
We recommend that any plan intending to comply with ERISA 404(c) name a specific 404(c) fiduciary who will be responsible for understanding the requirements of 404(c) and will work with your plan provider to make sure all requirements are met.
For a more in-depth discussion of fiduciary duties and principles, obtain a copy of the CUNA Mutual Fiduciary Handbook from your CUNA Mutual sales executive.
CUNA Mutual Retirement Solutions is a division of CUNA Mutual Group and the marketing name for CPI Qualified Plan Consultants, Inc., a CUNA Mutual Group member company. CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, its subsidiaries and affiliates. Annuity insurance products are issued by CMFG Life Insurance Company, located in Madison, Wisconsin. Each insurer is solely responsible for the financial obligations under the policies and contracts it issues.
Securities distributed by CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 866.512.6109. Non-deposit investment and insurance products are not federally insured, involve investment risk, may lose value, and are not obligations of or guaranteed by the financial institution. Representatives offer retirement and investment education but do not provide investment, legal or tax advice. Participants are encouraged to consult their own advisors.
The statements and representations contained in this document are intended to be educational in nature. They are not designed to be interpreted as investment advice.