It Has Been a Month Since our Seminar on Fiduciary Liability. What Do We Keep in Mind Moving Forward?

Were you able to join us for some delicious breakfast and a fiduciary risk course presented by Andy Larson of Columbia Threadneedle at the Burntwood Tavern? We can’t believe it has been a month already and we are now in the throes of planning our next seminar, which will take place on January 24th (so, please, save the date!).

During his presentation, Andy went over some sobering statistics in regards to the increasingly litigious environment that plan sponsors continue to face. In 2017 alone, the DOL’s enforcement results for ERISA plans included $1.1 billion in monetary enforcement, 1,707 civil cases, and 307 criminal cases. Furthermore, over 65 lawsuits have been filed against retirement plan fiduciaries due to excessive fees in the last few years*. It is safe to say that our clients walked away from breakfast feeling reassured that our partnership aims to assist them in managing these aspects of fiduciary responsibility as we sit on the same side of the table.

In case you weren’t able to join us, it is worth mentioning some key points which were central to the concerns of the plan sponsors who attended, as we continue to monitor legislative changes closely and keeping you informed.

Without further ado, here are some important takeaways that all plan sponsors should keep in mind:

There are four key fiduciary responsibilities for the sponsors of employee retirement plans that all plan sponsors need to be aware of: 

Exclusive benefit rule

Fiduciary must operate plan in a way that solely benefits participants and beneficiaries, while paying reasonable fees

Prudent expert rule

Fiduciary actions will be held to a standard of an experienced professional

Plan document rule

Fiduciary must follow the plan unless the terms of the plan contradict the rules of ERISA

Diversification rule

Fiduciary must offer a wide range of investment options to help participants meet their investment needs and diversify their investments accordingly

What are the potential consequences of a fiduciary failure?

 In case of a breach of duty, a fiduciary:

  • Shall be personally liable to make the good losses to the plan
  • Shall be personally liable to return any profits resulting from the breach
  • May be subject to civil penalties and fines
  • May be removed as a fiduciary

There are some components that can be an important part of a fiduciary liability reduction strategy:

  • Regularly conduct a fiduciary review
    • Identify plan fiduciaries and their roles
    • Assess plan documentation (e.g., the plan document, trust agreement, service provider agreements, summary plan description, fidelity bond, participant communication material, investment policy statement, etc.)
    • Evaluate plan operations and administration procedures (e.g., services providers and fees)
    • Address plan investments
  • Assess fiduciary gaps
  • Implement fiduciary liability reduction tactics
  • Document the process
  • Reassess plan on an ongoing basis

Finally, there are Department of Labor fiduciary correction programs and it is helpful to have an understanding of how they operate:

Self-Correction Program (SCP): Permits a plan sponsor to correct certain plan failures without contacting the IRS or paying any fee.

Voluntary Correction Program(VCP): Permits a plan sponsor to, any time before audit, pay a fee and receive IRS approval for correction of plan failures

Audit Closing Agreement Program (Audit CAP): Permits a plan sponsor to pay a sanction and correct a plan failure while the plan is under audit

If you are interested in obtaining the full slide deck or would like to speak further about fiduciary liability, please don’t hesitate to drop us a note!

We are excited to continue working to bring value to you. Please don’t forget to save the morning of January 24th for our first plan sponsor education event of 2019, the details of which will be introduced soon!

*Bloomberg Law Court Opinions. February 28, 2018.

Securities and Retirement Plan Consulting Program advisory services offered through LPL Financial, a registered investment advisor, member FINRA/SIPC. Other advisory services offered through Oswald Financial, a registered investment advisor and separate entity from LPL Financial.

Oswald Financial and LPL Financial are not affiliated with Columbia Threadneedle. This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.