Starting the New Year Right – Twelve Questions for a Plan Fiduciary

 The first quarter of the year presents a perfect opportunity to make sure the plan operations, service providers, and fiduciaries are well-positioned for the plan year ahead. Whether preparing for an annual review, crafting a plan service agenda for the next twelve months, consider exploring some of the key fiduciary practices using a Q&A approach offered below.

While there is no right or wrong answer, exploring each question is important. Responses will allow you to conduct a quick plan health assessment, diagnose possible opportunities for improvement, and may become a blueprint for plan sponsor services in 2019 and beyond:

• Are you able to identify all plan fiduciaries and their responsibilities?
• Is your plan document readily available, timely signed and up to date?
• Do you have a good understanding of how your plan works?
• Who is responsible for timely identification, notification, and enrollment of new participants?
• Do you follow a consistent process to timely distribute all required participant notices and disclosure documents?
• Do you know the deadlines for timely deposit of salary deferrals, loan repayments, and employer contributions?
• Can you identify all service providers for your plan?
• Do you know specifically what services your providers are responsible for and what, if anything, you need to furnish to those providers to enable them to carry out their duties (have you paid attention to the small print)?
• Have you received the fee disclosure documents from all of your service providers and when was the last time you reviewed them?
• Do you know how your service providers get paid for the work performed for your plan and whether those fees are reasonable?
• Do you follow a documented approach to review plan investments and/or service providers who provide investment recommendations for your plan?
• Do you offer a financial wellness program to help your plan participants prepare for retirement? If these duties are outsourced, do you review the provider communications to your plan participants?

No doubt, you have noticed that these questions focus largely on internal controls. Internal controls create a roadmap for individuals charged with management of a retirement plan. They help fiduciaries carry out their duties in a way that can reasonably assure achievement of plan’s objectives as well as compliance with applicable laws and regulations.

The Department of Labor (DOL) has historically emphasized that fiduciary prudence is demonstrated by the processes used by plan sponsors in managing their plans. For instance, while the Investment Policy Statement (IPS) is not required by ERISA, the DOL auditors have been known to inquire about this document to evidence prudent process. In a similar fashion, questions concerning existence and utilization of internal controls have been conspicuously present in recent Internal Revenue Service (IRS) audits. Representatives of the IRS have expressed on multiple occasions that existence of such controls is indicative of plan’s health; conversely, when plans lack formal internal controls they appear to be at a higher risk for non-compliance in operation and maintenance thus inviting further scrutiny.

For discussion purposes only and in no way represents legal or tax advice. For advice regarding your specific circumstances, the services of an appropriate legal or tax advisor should be sought.