Whether you have responsibilities as a CFO, staff attorney or HR professional, or instead serve as an independent plan service provider (third party administrator, recordkeeper, or investment advisor), you should be concerned about the new duties of retirement plan fiduciaries.
Plan fiduciaries are those responsible for operating the plan and include the sponsoring employer (which frequently is designated as the “plan administrator”), members of any investment or administrative committee, and employees serving as plan trustee or co-trustee.
The detailed retirement plan fee disclosure rules have imposed specific responsibilities on plan fiduciaries. Cases like Tussey v. ABB, Inc. make it clear that retirement plan fiduciaries can be held accountable for non-compliance (see here for details). Plan fiduciaries must act now to assure compliance.
Consider the following questions that can help determine whether or not plan fiduciaries are properly responding to the fee disclosure rules and guidelines reflected in the Tussey decision:
- Have plan fiduciaries reviewed and evaluated the July 1, 2012 provider fee disclosures to make sure all covered service providers have provided compliant disclosures?
- Have plan fiduciaries determined the reasonableness of the fees disclosed by plan service providers and memorialized that determination in writing?
- Have plan fiduciaries who have not delegated investment responsibilities to an outside investment manager deliberated over the plan’s investment offerings?
- Have plan fiduciaries made a written record of their deliberations?
- Do plan fiduciaries meet on a regular basis to review the plan’s investment performance and provider fees?
If the answer to any of these questions is “no,” then your plan fiduciaries need to take corrective action.
Plan service providers (TPAs, recordkeepers and investment advisors) also should think about the fiduciary practices of their clients. Although advising clients on fiduciaries’ practices may be beyond the scope of their service agreements, if the plan fiduciaries’ conduct results in liability, those fiduciaries may want to share that liability with you. Consider referring your clients to providers who can assist plan fiduciaries with their compliance concerns even if you are not in a position to do so.
If your plan fiduciaries need to remedy any deficiencies in their current practices, consider the best way to proceed. Do the fiduciaries want to work directly with their current plan service providers in disclosing and evaluating these deficiencies? Do they want to acknowledge these deficiencies in communications that are subject to discovery by government agencies and aggrieved participants? Do they want to create a “roadmap” to be followed by any claimant that may seek damages for past compliance deficiencies?
Consider engaging special legal counsel to work directly with plan fiduciaries and to act as a conduit for input from plan service providers. By engaging special counsel that works only for the plan fiduciaries, any communications concerning compliance deficiencies can be protected from unintended disclosure as confidential attorney-client communications and attorney work product.
Bear in mind that the lawyer advising the sponsoring employer may not be able to assert confidentiality with respect to communications with fiduciaries concerning their retirement plan duties. In any event, retirement plan fiduciaries need to be evaluating the compliance of the July 1, 2012 provider fee disclosures right now in order to satisfy the recent fee disclosure rules.
Recommendations: CFOs, in-house attorneys and HR staff need to assist plan fiduciaries now with their new responsibilities under the fee disclosure rules. Current plan service providers (TPAs, recordkeepers and investment advisors) may want to consider their own exposure and assist their clients with fiduciary compliance. In either case, fiduciaries who want to correct any compliance deficiencies should consider engaging competent outside legal counsel to assure communications that are protected by attorney-client confidentiality.