Health system boards, investment committees and officers with fiduciary responsibilities will be interested in recent developments regarding fiduciary standards for employee retirement plans.
In early February, the Trump administration directed the Department of Labor (DOL) to study a new fiduciary rule proposed last year (and scheduled to become effective this April) significantly impacting retirement plans governed by ERISA, and to rescind or revise the rule if it is not consistent with the administration's regulatory principles. The proposed fiduciary rule greatly expands who is considered a fiduciary and imposes new responsibilities for all plan fiduciaries. While the fate of the new rule remains unknown, its impact has already been felt in the marketplace of financial service providers to retirement plans, as some have embraced fiduciary status and changed the way that they price their services. At a minimum, this changed marketplace has raised fiduciary risks associated with selecting among service providers with varying fee structures.
Establishing a solid fiduciary governance structure and a process through which fiduciary decisions are made are essentials for modern day retirement plan management and should not await a decision on the DOL’s proposed fiduciary rule. In fact, prudent plan governance may become even more important in the new marketplace for financial service providers. In addition, the current spate of litigation instituted against plan sponsors in the non-profit sector for fiduciary breaches arising from service provider fees provides notice that fiduciary decisions are being monitored by a cottage industry ready, willing and able to bring a law suit to “protect” employees’ retirement assets. Accordingly, health system boards, investment committees and officers with fiduciary responsibility would be well served to review the documents (plan and trust documents, contracts and investment policies) that serve to guide fiduciary decisions.