Posts in Fiduciary Issues
Appellate Court Affirms Dismissal of Chevron ERISA Lawsuit

“Agreeing with a federal district court that plaintiffs did not allege sufficient facts to support a plausible claim that Chevron Corporation and its defined contribution (DC) plan committee breached their Employee Retirement Income Security Act (ERISA) duties of loyalty and prudence, the 9th U.S. Circuit Court of Appeals affirmed dismissal of the lawsuit.” Click here for more details.

Source: PlanSponsor

Groups Say SEC’s Best Interest Proposal Fails to Provide Uniform Fiduciary Standard

Many groups and regulatory officials feel as though the SEC’s ‘best interest’ proposal “fails to impose a uniform fiduciary standard.”  Xavier Becerra, California’s Attorney General, calls the proposed rules “toothless” because emphasis is placed on “disclosure instead of preventing conflicts of interest”. Additionally, many groups feel as though the SEC did a poor job by leaving key terms, such as ‘best interest’, undefined. Throughout this article, organizations such as AARP, FPA, PIABA comment on the proposal and offer their recommendations on ways to clear up some of the ambiguity surrounding the new rulings. Click here to read the full article.


University of Chicago Settles Excessive Fee Law Suit

"In addition to the monetary settlement, the university has agreed to “retain certain structural changes to the Plans that will further benefit the Plans and their participants,” including agreeing “not to increase per-participant recordkeeping fees for three years from the date of Final Approval of the Settlement, and to use commercially reasonable best efforts to continue to attempt to reduce recordkeeping fees.”

Click here to read more.


Colorado Public Plan Coalition (CPPC) Annual Conference

The Colorado Public Plan Coalition (CPPC) is a 501c(6) nonprofit organization which provides education, networking opportunities for administrators of Colorado public plans, and powerful advocacy for public employee benefit plans. CPPC trains public plan trustees on their fiduciary responsibilities and Colorado laws affecting public plans. Innovest and its professionals have been directly involved in CPPC for more than 20 years. Wendy Dominguez, Innovest’s president and co-founder, served as the chair of the organization at its inception. More than 80 public sector plans attend the conference regularly. Innovest is a regular contributor and volunteer to the educational programs, delivering presentations on plan benchmarking, investing, fiduciary responsibility, and participant communication.

CPPC is an excellent resource for public plan sponsors. Please join us at CPPC’s annual conference from August 28 to 31 in Beaver Creek, Colorado. Click here to see the agenda for this year's conference and to register. CPE credits are being offered for the first time.


The Who's Who of Retirement Plan Fiduciaries

By Gordon Tewell, CFA, CPC, Principal

The goal of this article is to define the various types of plan fiduciaries and to help clarify the roles of each of these fiduciaries. 

A plan’s fiduciaries will ordinarily include the trustee, investment advisers, all individuals exercising discretion regarding investments and the administration of the plan, all members of a plan’s administrative committee (if it has such a committee), and those who select committee officials.

A plan must have at least one fiduciary (a person or entity) named in the written plan, or through a process described in the plan, as having control over the plan’s operation, but in many cases  plans may have several named fiduciaries. In some cases the decision making involved in operating a retirement plan make the person or entity performing them a fiduciary.

Named Fiduciaries

The ERISA Section 402(a) Named Fiduciary
The ERISA section 402(a) Named Fiduciary is the main fiduciary for a qualified retirement plan. This is the named fiduciary that has power over all other plan fiduciaries. The 402(a) fiduciary is the named decision-maker, not an advisor. This fiduciary has responsibility for selecting, evaluating and monitoring all plan fiduciaries and service providers to the plan.

The 402(a) Named Fiduciary must understand and adhere to principles of fiduciary prudence, and despite possible conflicts of interest due to in most cases that they will be an employee of the sponsoring employer, they are bound by the key tenets of fiduciary responsibility including acting in the sole interest of the plan participants and beneficiaries.

What is a 3(21) Named Fiduciary?

The 3(21) Named Fiduciary is often referred to as “The Mother of All Fiduciaries” because their primary role is to select, monitor, and benchmark the other fiduciaries and plan service providers.

The duties of a 3(21) Named fiduciary are generally set by ERISA and include the following: Monitor the assignment and performance of fiduciary duties of the Plan Administrator, Investment Manager, and Investment Advisors; provide oversight of the committee responsible for selecting and benchmarking plan service providers and provide an annual review of such; verify and document ERISA bond and fiduciary insurance coverage of all parties; create and maintain written documents covering the roles and responsibilities of plan fiduciaries

The ERISA Section 3(16) Plan Administrator

In the typical defined contribution plan, either the plan sponsor or another employee employed by the plan sponsor is named as the 3(16) plan administrator. The Plan Administrator will administer the Plan for the exclusive benefit of the Plan Participants and Beneficiaries, and in accordance with the terms of the Plan. If the terms of the Plan are unclear, the Plan Administrator may interpret the Plan, provided such interpretation is consistent with the rules of ERISA and Code §401 and is performed in a uniform and nondiscriminatory manner.

This plan administrator is the center of communications for the plan. For example, it has responsibility for providing important plan information to plan participants such as disclosures, Summary Plan Descriptions, and other notices and statements. In addition, the plan administrator has statutory responsibility for ensuring that all filings with the federal government such as form 5500s are made in a timely manner. The 3(16) is in charge of all communications with plan participants, the government, and any other communications to or from the plan.

The ERISA Section 403(a) Trustee
The ERISA section 403(a) Trustee is named in the plan documents as the fiduciary solely responsible and liable for the plan's investment options. More explicitly, the ERISA section 403(a) Trustee is "a person or a group of persons recognized as having exclusive authority and discretion over the management and control of plan assets."

A lot of confusion is created within the industry over the concept of the trustee. The confusion stems from common name used between an ERISA 403(a) Trustee and a "directed trustee" holding the assets of a qualified retirement plan in trust. The two roles are significantly different; one is a named fiduciary under ERISA with authority and discretion over the management and control of plan assets, while the other holds plan assets with no discretionary authority under ERISA.

Retained Fiduciaries

An ERISA Section 3(21) Non-discretionary Fiduciary

An ERISA 3(21) fiduciary comes in two flavors often times described as “full-scope” or “limited scope.” A full scope 3(21) is akin to an ERISA 402(a) Named Fiduciary. Fiduciaries who act as “Co-Fiduciaries,” fall under the 3(21) “limited-scope” category; specifically ERISA 3(21)(a). While there are independent experts who assume 3(21)(a) status, a 3(21)(a) does not accept discretionary authority and therefore, does not alleviate other plan fiduciaries of any potential fiduciary liability.

An ERISA Section 3(38) Investment Manager

An ERISA section 3(38) Investment Manager is not typically named in the plan document. Instead, it is retained via a written contract either directly by the plan sponsor or by the 3(21) Named Fiduciary. A 3(38) Investment Manager has discretionary responsibility to select, monitor and replace a plan's investment options. The plan sponsor or the 3(21) Named Fiduciary has the duty to ensure that the initial decision to appoint a 3(38) Investment Manager was prudent and that such decision continues to be prudent through a monitoring function.

In conclusion, there are a number of roles that may define a retirement plan fiduciary. What is most important, however, is to make sure individuals are aware of their fiduciary status, roles and liabilities as such.

Source: Innovest

Three New Year's Resolutions for Plan Sponsors

It's time again to make resolutions for the New Year. If you're like me, some of these resolutions you'll keep and some....well, may not be so easy. In my view, simplicity is the key to successful resolution keeping, so I've considered three (yes, only three!) to consider.

Create a Fiduciary File

Make sure you have one - and that it is up to date. This file should contain all plan documents and amendments. Thanks to the world of emails and the Portable Document Format (pdf), records of all plan documents and amendments requires a lot less paper and are much easier to store. Client portals like Innovest's InnoVault, allow plan sponsors to upload documents to a secure server so they are available when needed. A fiduciary file not only maintains copies of plan documents, but it also houses documentation of the decisions made by the board and a written summary of the processes used to reach those decisions. Keeping documents related to all fiduciary decisions, such as hiring service providers, meeting minutes, changing and reviewing investment options, and other decisions, ensures that you're creating a paper trail for future board members and protecting yourself in case of an audit.

Review Plan Expenses

Plan sponsors have a fiduciary responsibility to ensure that the plan's fees and expenses are reasonable. Plan sponsors need to review the expenses charged to their plan and determine whether they are reasonable for the services provided. Plan sponsors should have received fee disclosures from their plan provider. Reviewing the disclosures and benchmarking those fees to those charged in similarly sized plans are the most effective ways to ensure that plan expenses are reasonable. Who knows? This exercise might also provide you the opportunity to renegotiate lower fees, and the savings to the plan could be substantial. That would be a great way to begin 2018!

Review Plan Providers

Plan Sponsors need to resolve to review the work of their providers to make sure they are doing the work promised. Reviewing the services standards, education offerings and other promised services ensures that your plan is receiving the services for which it has paid. Plan sponsors should review their plan providers by either doing the work themselves or by hiring a qualified consultant to evaluate the offerings in comparison to other providers in the marketplace. Vendors frequently introduce new tools and technologies, which provides an opportunity to learn about new tools and services that may add value to your participants.


Excessive Fee Suit Falls Short in Court

Plantiffs in the excessive fee law suit against Delta Air Lines had their suit dismissed. The judge ruled that since the plantiffs were not personally invested in the specific criticized funds and did not actually pay the alleged excessive recordkeeping fees,  they could not sue.  Click here to read more.

Source: NAPA Net