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What are fiduciary responsibilities?
Fiduciaries are subject to standards of conduct under ERISA because they act on behalf of participants in a retirement plan and their beneficiaries.
Fiduciary responsibilities include:
The duty to act prudently is one of a fiduciaryís central responsibilities under ERISA. It requires expertise in a variety of areas, such as investments. If the fiduciary does not have the expertise required, he or she should hire someone with that professional knowledge. In addition, prudence focuses on the process for making fiduciary decisions. It is wise to document decisions and the basis for those decisions. For instance, in hiring any plan service provider, a fiduciary may want to survey several potential providers, asking each for the same information and providing each the same requirements, thereby documenting the process and the decision.
Following the terms of the plan document is also an important responsibility. The document serves as the foundation for plan operations. Employers will want to be familiar with their plan document, especially when it is drawn up by a third-party service provider, and periodically review the document to make sure it remains current. For example, if a plan official named in the document changes, the plan document must be updated to reflect that change.
Plan assets should be diversified to minimize the risk of large investment losses. Fiduciaries should consider each plan investment as part of the planís entire portfolio. Once again, fiduciaries will want to document their evaluation and investment decisions.