The Importance Of Fiduciary Training

What does it mean to be a member of your company’s retirement plan committee? It probably means that you are intelligent and dependable and your CEO values your contributions. Your company leadership believes you are trustworthy, enough so to give you control over something as important as their retirement plan. It also means that you are now a fiduciary. Being a fiduciary is a legal responsibility that you automatically take on when you become a committee member. However, do you and the other committee members even know what a fiduciary is? Read on to learn key factors that are typically included in fiduciary training.

Many committee members receive no fiduciary training or learn what it exactly means to be a fiduciary. With government audits and class action lawsuits increasing, that can be very dangerous. It is important for every committee member to understand their legal responsibilities as a fiduciary.

What Does It Mean To Be A Fiduciary?

Fiduciary responsibilities are spelled out in detail in the Employee Retirement Income Security Act (ERISA). Two of the most important things you do as a fiduciary are to use a “prudent” process and to follow the terms of your plan documents.

For every decision you make, you need to have a process that you follow to arrive at that decision. Both your process and decision must be in alignment with your plan documents as well. You can’t have one without the other. Failure to do both is a breach of fiduciary duty and can have legal consequences.

Familiarize Yourself With Plan Documents

Your first step in fiduciary training and being a retirement plan committee member is to be familiar with the following documents:

Plan Document

The Plan Document is a formal written plan that details how the retirement plan operates and its requirements. You should familiarize yourself in particular with the administrative or fiduciary section near the end. That is where the plan governance information is, which you will need to follow and understand to fulfill your fiduciary duty.

Company Bylaws

Your company bylaws may refer specifically to the retirement plan committee. They would describe your responsibility for the administration and investments of the company’s retirement plans. Understand what the bylaws say about your role and responsibilities.

Board Of Director Resolutions

Your company Board of Directors may have passed resolutions regarding the company retirement plan. Look for resolutions delegating authority or responsibility with respect to a retirement plan.

Retirement Plan Committee Charter

Your committee itself may have a charter. This is a document used by the Board of Directors to delegate and outline committee responsibilities and duties.

Investment Policy Statement

Though not required by law, most retirement plans have an investment policy statement (IPS). It describes the process for selecting and monitoring the investments under each retirement plan.

Understand Your Plan’s Governance

All of these documents describe your legal role as a member of the retirement plan committee and are used to create the governance structure of your plan. Your governance process is important because it is the first step in fulfilling your fiduciary duty. You need to create and document a good governance process, and then follow it in all that you do.

Each of the above documents should be reviewed to ensure that the plan governance language is consistent between them. Then, you need to make sure that is consistent with the actual operation of the plan. Once everything is in alignment, you can begin sorting out responsibilities.

It helps to draw an actual chart of the different responsibilities described in the plan’s legal documents. Then, names can be added to the chart so that everyone on the committee is in agreement as to who is doing what.

To further clarify things, it helps to break down responsibilities into two categories; fiduciary functions and non-fiduciary functions. Fiduciary functions include selecting and monitoring plan service providers and investment options and administrative issues. Non fiduciary functions are things more along the lines of plan design and amendment authority.

How We Can Help

It will be much easier for you and your fellow committee members to understand and fulfill your fiduciary duty when you have everything spelled out so clearly. If you need help mapping out your plan governance or would like expert fiduciary training for your committee, give us a call at (312) 973-4911 or email info@planpilot.com. We are experienced retirement plan consultants who can give you the knowledge your committee needs to protect against breach of fiduciary duty.

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