Just as retirement plan sponsors must deeply understand and comply with ERISA, so too must each and every member of a retirement plan committee. Regular meetings, education, training, and follow-up are best practices. Committee members are fiduciaries and can be held personally liable for plan losses.
Making Informed Decisions
The DOL’s guidance booklet, “Meeting Your Fiduciary Responsibilities,” is a perennial must read for both plan sponsors and members of plan committees, as understanding exactly what the government means when it comes to serving as a retirement plan fiduciary is essential. Staying up to speed on new regulations and legislation, including SECURE 2.0, is also a must-do for committee members. Overall, experts underscore that sponsors and committee members must understand that under the high standards of ERISA, all fiduciaries have a very serious legal responsibility in overseeing plans and participant assets: “Your [fiduciary] responsibility really is to the participants, and you want to make sure that the people making those decisions for the plan are making them based on the right information.”
In addition to reading, education and training for committee members can be provided through live or virtual meetings, online self-guided learning experiences, case studies and even follow up quizzes to ensure understanding. Typically, plan sponsors turn to legal counsel, advisors and service providers to arrange for the education and training of committee members:
Tools and training must ensure the committee members know they are bound under the law to operate the retirement plan in accordance with the Employee Retirement Income Security Act. The 1974 law mandates that retirement plan committees must “run the plan solely in the interests of participants and beneficiaries and for the exclusive purpose of providing benefits and paying plan expenses.”
It’s common to convene retirement plan committees about twice each year, with one meeting specifically focused on fiduciary training. Some committees meet four times a year, and in tandem with the training, it’s even possible to run through compliance checks and balances in real time, reviewing data, and “comparing…plan fees and best practices to those of competitors….” Of course it is also key for committee members to understand what’s at stake should fiduciary failures result in losses to participants:
Making prudent fiduciary decisions for the plan involves staying informed and monitoring recordkeeping, administration and investment fees….Sponsors should know that “[plan] fees don’t have to be the lowest, but they need to be competitive and benchmarked, also, with the services provided….Individuals who serve on a retirement plan committee take on the role of plan fiduciary. Were the plan to violate ERISA and face legal action, committee members could be personally liable to restore any losses to the plan or to restore any profits made through improper use of plan assets…
ERISA Fidelity Bonds?
According to the Department of Labor, fiduciaries must obtain and keep current with ERISA fidelity bonds: “Every person who “handles funds or other property” of an employee benefit plan is required to be bonded unless covered under an exemption under ERISA. ERISA makes it an unlawful act for any person to “receive, handle, disburse, or otherwise exercise custody or control of plan funds or property” without being properly bonded.”
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