FIDUCIARY RESPONSIBILITIES
R. SCOTT GARDNER, CIMA
SENIOR INVESTMENT ADVISOR
PACIFIC PORTFOLIO CONSULTING, LLC
Agenda
 Overview of Plan Governance
 Elements of a plan
 Who are the plan fiduciaries?
 Significance of being a fiduciary
 Fiduciary duties
 Limiting Liability
 Selecting a service provider
 Monitoring service providers
Not for reproduction and/or distribution.
All data obtained from sources believed to be reliable.
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Overview of Plan Governance
Trustee Committee
Custodian
Advisor
RK\TPA
Custodies Assets
Co-Fiduciary to Plan
Administers Plan
Documents
Executes Investment
Trades
Evaluate Capital
Markets
Maintain Participant
Records
Manages Cash Flow
Provides Investment
Options
Host Participant
Website
Not for reproduction and/or distribution.
All data obtained from sources believed to be reliable.
3
Elements of a Plan
 Written plan that describes the benefit structure and guides
day-to-day operations.
 A trust fund to hold the plan’s assets.
 A recordkeeping system to track the flow of monies going to
and from the retirement plan.
 Documents to provide plan information to employees
participating in the plan.
Source: U.S. Department of Labor, Employee Benefits Security Administration
Not for reproduction and/or distribution.
All data obtained from sources believed to be reliable.
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Who is a Plan Fiduciary
 Fiduciary status is based on the functions performed for the plan,
not just a person’s title.
 A plan must have at least one fiduciary (person or entity) named in
the written plan.
 Anyone who takes discretionary action to manage and administer
the plan or exercise control over plan assets.
 A plan’s fiduciaries ordinarily include the:
Trustee
Investment consultants/advisors
Individuals exercising discretion in the administration of the plan
Members of the plan’s administrative committee
Members of the plan’s investment committee
Source: U.S. Department of Labor, Employee Benefits Security Administration
Not for reproduction and/or distribution.
All data obtained from sources believed to be reliable.
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Significance of Being a Fiduciary
 Fiduciaries act on behalf of participants in a retirement plan
Have important responsibilities
Subject to standards of conduct
 Important responsibilities
Acting solely in the interest of plan participants and their beneficiaries
Carrying out duties prudently
Following plan documents
Diversifying plan investments
Keeping plan expenses reasonable
Source: U.S. Department of Labor, Employee Benefits Security Administration
Not for reproduction and/or distribution.
All data obtained from sources believed to be reliable.
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Duties of a Fiduciary
 Fiduciaries are held to the highest standard of conduct imposed by
law.
 Fiduciary standards applicable to non-ERISA plans are in need of
clarification.
 Non-ERISA plans are governed by state law whose fiduciary
standards are very similar to ERISA.
 Most legal counsel typically advise public sector plan sponsors to
manage their non-ERISA plans as if they were covered by ERISA
There is more guidance around ERISA
ERISA is the highest standard
Source: Center for Due Diligence
Not for reproduction and/or distribution.
All data obtained from sources believed to be reliable.
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Duties of a Fiduciary
 There are five duties of a fiduciary that must be carried out in
accordance with the plan documents
Loyalty
Documentation
Prudence
Diversification
Reasonable plan expenses
Source: IMCA
Not for reproduction and/or distribution.
All data obtained from sources believed to be reliable.
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Loyalty
 Also called the “exclusive benefit rule”
 Plan fiduciaries must act:
Solely in the best interests of the plan participants.
For the exclusive purpose of providing plan benefits.
 Fiduciaries cannot put employer interests before those of plan
participants.
 Avoid conflicts of interest.
 Ensure that expenses for administering the plan are reasonable.
Source: IMCA
Not for reproduction and/or distribution.
All data obtained from sources believed to be reliable.
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Documentation
 Maintain up to date, signed documents including:
Plan documents and summary plan materials.
Trust agreement.
Plan forms, rules, and procedures.
Service agreements.
Third party contracts.
Investment contracts.
Investment Policy Statement.
Amendments to the above documents.
Committee meeting minutes.
Source: IMCA
Not for reproduction and/or distribution.
All data obtained from sources believed to be reliable.
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Prudence
 Requires fiduciaries to act with the care, prudence, skill and
diligence a knowledgeable person would use in administrating the
plan.
 Prudence requires good judgment and sound processes in every
plan activity undertaken by the fiduciaries.
 More than just an obligation to be competent and careful in your
conduct, prudence is careful, diligent, thorough decision-making
process:
Gather, examine and give appropriate consideration to relevant information.
Implement the decision.
Periodically monitor performance to ensure your decisions continue to be in the
best interest of the plan and the participants.
 Retain third parties to assist you if necessary.
Source: IMCA
Not for reproduction and/or distribution.
All data obtained from sources believed to be reliable.
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Diversification
 Investments must be diversified to minimize the risk of large losses
 There must be at least three different investment options that offer
different risk/return characteristics
Evaluate Liquidity, Diversification, Return & Safety of investment offerings
 Election choices must allow diversification with materially different
risk and return characteristics
Source: IMCA, U.S. Department of Labor, Employee Benefits Security Administration
Not for reproduction and/or distribution.
All data obtained from sources believed to be reliable.
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Diversification
 Most plans offer
Equity Funds
Bond Funds
Money Market Funds
 Other plans offer
Target date funds
Model allocations
Brokerage windows
Source: IMCA
Not for reproduction and/or distribution.
All data obtained from sources believed to be reliable.
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Reasonable Plan Expenses
 Fees are just one of several factors fiduciaries need to consider
when selecting investments and service providers
 Law does not specify permissible level of fees, but fees must be
“reasonable”
 Plan’s fees should be monitored on an ongoing basis to ensure they
remain reasonable
 Take into account level and quality of service, not just bottom line
cost
 When comparing services and fees between vendors, make sure
you compare apples-to-apples
 Information provided by service providers should include all forms of
compensation
Source: U.S. Department of Labor, Employee Benefits Security Administration
Not for reproduction and/or distribution.
All data obtained from sources believed to be reliable.
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Limiting Liability
 With these responsibilities there is potential for liability
 Fiduciaries can limit liability by
Properly documenting processes
Providing diversified investments
Providing participants with sufficient information to make choices
Hiring third party vendors when fiduciary doesn’t have expertise
Source: U.S. Department of Labor, Employee Benefits Security Administration
Not for reproduction and/or distribution.
All data obtained from sources believed to be reliable.
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Hiring a Service Provider
 Hiring a service provider is a fiduciary function
 Provide each prospective provider with the same information
 Document the selection process
 Service providers must provide information to you about the
services they will provide and the compensation they will receive
 When hiring a provider, consider the provider’s
Financial condition
Experience with retirement plans of similar size and complexity
Quality of service
Recent litigation against the firm
Description of business practices
Source: U.S. Department of Labor, Employee Benefits Security Administration
Not for reproduction and/or distribution.
All data obtained from sources believed to be reliable.
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Monitoring Service Providers
 Establish and follow a formal review process
 Evaluate any notices from service provider regarding upcoming
changes to service or compensation
 Review the service provider’s performance
 Review actual fees charges
 Confirm provider’s policies and procedures
 Follow up on participant complaints
Source: U.S. Department of Labor, Employee Benefits Security Administration
Not for reproduction and/or distribution.
All data obtained from sources believed to be reliable.
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Tips for Employers with Retirement Plans

Identify your plan fiduciaries and ensure they are clear about their responsibilities.

If participants make their own decisions, provide them with enough information to
make informed decisions.

Know the schedule to deposit participants’ contributions in the plan. Make sure it
complies with the law.

If hiring a third party service provider, look at a number of providers, give each
potential provider the same information, and consider the reasonableness of their
fees.

Document the third party service provider hiring process.

Identify parties in interest to the plan and monitor transaction with them.

Review your plan document and make necessary updates. Provide participants with
an updated Summary Plan Description.

Confirm that individuals handling plan funds have a fidelity bond.
Source: U.S. Department of Labor, Employee Benefits Security Administration
Not for reproduction and/or distribution.
All data obtained from sources believed to be reliable.
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Questions?
Not for reproduction and/or distribution.
All data obtained from sources believed to be reliable.
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