Can you check all these boxes as a 401(k) plan fiduciary? This is a great way to make sure you’ve taken all the steps needed to responsibly administer your company 401(k) plan. This checklist is a fiduciary best practice guide for all 401(k) plan managers.
Below is a checklist of ongoing best practices for all 401(k) plan fiduciaries to consider. This list may not be comprehensive, for further guidance and information consult your ERISA counsel.
How do I know if I am a Fiduciary?
Do your duties cause you to exercise discretion over plan assets or administration (hiring service providers, making investment choices, spending plan assets, etc.). If so, you are a fiduciary and need to make sure you understand and comply with your duties.
Mitigating Fiduciary Liability
- Consider establishing procedures for delegating fiduciary authority. For example, hiring a third party to act as a 3(38) investment manager or 3(16) administrator for your plan
- Provide fiduciary education for new fiduciaries as well as continuing education for all fiduciaries. Many plan service providers will offer resources to help with fiduciary education
- Find out who is responsible for directing investments in your plan
- Consider setting up a formal investment committee if you don’t have one
- Consider developing an investment policy statement (IPS) documenting all of the plan’s investment requirements and processes
- Consider engaging an independent fiduciary (like a 3(38) investment manager, or a 3(21) investment advisor) to help monitor the appropriateness of all investments options
Overseeing Service Providers
- Conduct a periodic review of service providers to ensure that service and performance standards are being met
- Periodically benchmark your plan’s fees and services to make sure expenses are reasonable for services rendered
- Document the review, including meetings, issues discussed, and any decisions made
- Familiarize yourself with the requirements of Section 408(b)(2) of ERISA
- Conduct an in-depth review of service providers periodically to ensure that your fees and arrangements are consistent with current practices and costs and to determine whether a new request for proposal process is warranted
- Assess the reasonableness of fees and whether any conflicts exist
- Talk to your service providers about providing required participant disclosures
- Provide ongoing communications on investments and plan features (e.g., loans, distributions, or contributions)
- Make sure all communications are accurate
- Distribute information to all eligible employees regarding the investment options available under the plan
- Consider conducting educational meetings and providing general financial information and investment education
- Consider using automatic enrollment with a qualified default investment alternative (QDIA)
Plan Administrator Basics
- Develop a compliance plan or calendar to keep track of the various deadlines throughout the plan year
- Periodically review the plan documents to ensure that they reflect current practices and have been updated for legal and regulatory changes
- Complete and file all required government reporting, such as the Form 5500
- Comply with the applicable Internal Revenue Code nondiscrimination tests
- Review the process for achieving the following in a timely manner:
- Collecting employee contributions and loan repayments
- Forwarding contributions and loan repayments to the service provider, and
- Investing the contributions and loan repayments
Fiduciary Liability/DOL Audit
- Maintain a well-documented, prudent fiduciary process for decision-making (Consider including documentation that decisions were actually made)
- Consider obtaining liability insurance that protects plan fiduciaries from the costs associated with litigation (including unfavorable judgements)
- Designate a point person (often an in-house or outside attorney) to coordinate and work with the Department of Labor (DOL) in the event of an investigation
Learn more about fiduciary support levels for you and your employees from Fisher 401(k).
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