Happy New Year! As part of our annual tradition in helping retirement plan fiduciaries get started down the right path in the new year, we’re pleased to present our Top Ten New Year’s Countdown. But, wait, what’s better than a Top Ten Countdown list to kickoff 2015? How about a Top Ten list set to Pop Culture themes that dominated 2014? Well, here goes nothing…. Because we’re happy (clap along if you feel like a fiduciary without a roof):
1. It’s all About The Fees, about the Fees, No trouble. Another year, another reminder (thank you, Meghan Trainor) that fees should be closely scrutinized by plan fiduciaries. Participant fee disclosures are not the new kid on the block anymore; however, fiduciaries should still ensure that all required fee disclosures are complete, accurate and made timely. Plan fiduciaries should also periodically monitor all fees charged against the plan’s assets to ensure reasonableness.
2. The DOL Ice Bucket Challenge – I challenge you, within 24 hours – to get your payroll remittances in…. The DOL has not receded from its firm position that employee deferrals segregated from corporate assets should be paid into the plan “as soon as reasonably practicable”. So, now is as good a time as any to visit with payroll and/or HR to make sure an air-tight process is in place for timely transmitting employee contributions and loan repayments to the plan. Sure, 24 hours may not be a feasible deadline, but remember that the 15th business day of the following month is not a safe harbor for transmissions.
3. “Game of Thrones” is our new “Sopranos”, “Orange Is the New Black” and “IPS is the new Plan Document”. With heightened scrutiny of plan fiduciaries flowing in part from the so-called 401(k) fee litigation, retirement plan fiduciaries should pay particular attention to the contents of the plan’s investment policy statement (IPS) – or adopt one if its missing. The review should be focused on ensuring that the IPS is consistent with the fiduciaries’ intent, the other governing plan documents and actual practice (e.g., do we actually use a watch list for 1-year before removing an underperforming manager?).
4. ‘Cause the players gonna play, play, play, play, play; And the haters gonna hate, hate, hate, hate, hate; Baby, I’m just gonna delegate, gate, gate gate. Delegate it all…. It all?? Being an ERISA fiduciary is hard and delegating certain responsibilities may seem attractive. Retirement plan fiduciaries are well-served to consider retaining professionals and service providers to help perform certain fiduciary tasks. Keep in mind, however, that the act of delegating is a fiduciary act – and even after delegating responsibilities, fiduciaries still have a duty to monitor plan service providers. Also, delegation needs to be permitted by the governing plan documents.
5. Justin Bieber went to jail again, but this doesn’t have to happen to you. Get fiduciary liability insurance. Okay, so ERISA fiduciary jail is unlikely, but personal liability for restoring to the plan amounts lost due to a breach of ERISA’s complex rules is a real possibility. Remember, that ERISA fiduciary liability insurance serves as a first line of defense for potential breach of fiduciary duties. These policies often come as riders to D&O coverage; consider getting your company’s risk manager or counsel engaged to review the scope and amount of the coverage to assess its appropriateness. Remember that a fiduciary liability insurance is not the same as a fidelity bond. As discussed here, a fidelity bond is separate and distinct from fiduciary liability insurance – and bond coverage is specifically required by law.
6. It’s not just for Actors at the Oscars, Take a “Group Selfie” when your committee next meets (Yes, that’s a thing now – and a real word according to the Oxford Dictionary). Sure, it may not be as exciting as the red carpet or post-Academy Awards parties, but holding regular plan fiduciary/committee meetings can be a grand ole’ time. Plan fiduciaries should meet periodically (we generally recommend at least quarterly) to consider information regarding performance, selection, and oversight of plan investments, investment managers, service providers, and other plan administrative matters. Minutes of the meetings should be kept to help demonstrate that the fiduciaries have engaged in a prudent process of analyzing and assessing relevant issues.
7. Avoid “Scandals” and Having to Call Olivia Pope’s Crisis Management Firm…. Provide fiduciary education and training to plan fiduciaries. It is another one of our favorite taglines – the simple act of providing fiduciary training to your organization’s ERISA fiduciaries is a major step in minimizing fiduciary liability. Training will educate fiduciaries as to their responsibilities and help establish a record of procedural prudence. There are some really nifty fiduciary training programs which can be easily customized for any group of plan fiduciaries.
8. I’m so fancy, You already know… I’ve reviewed my plan docs, and I’m good to go. Since fiduciaries should make decisions by following the applicable plan documents (e.g., plan, summary plan description, IPS, trust, committee charters, delegations, etc.), fiduciaries should make sure plan documents are consistent with intended plan design, with one another and with actual practice. This can be an arduous undertaking, but can pay huge dividends down the road in the event of litigation or an in-depth plan audit by the IRS or DOL.
9. “How I Met Your Mother” ends, but fee litigation continues. The list of 401(k) fee cases left on the docket is dwindling, but the Supreme Court has agreed to weigh in on a standard of review issue in the Tibble case. Moral of the story??? Stay tuned, pay close attention to items 1-7 above, pay really close attention to item 10 below and, when in doubt, get the help of retirement plan experts.
10. Let it Go, Let it Go, Can’t Let ERISA Concerns Hold you Back anymore…. If we’ve said it once, we’ve said it a thousand times – being a good fiduciary is all about having a procedurally prudent process. For each fiduciary decision you should: inquire; analyze; consider alternatives; get help and advice if needed; and document the process, actions and basis for the decision. Completing these tasks will help establish and demonstrate procedural prudence, and ERISA stress will melt away. Pop the bubbly once more!