Best Practices for Fiduciaries

Last week on a webcast I talked about Fiduciary Responsibilities under ERISA. For the benefit of those whose missed it, highlighted below is my version of best practices to be followed in meeting your fiduciary responsibility.

1. Fiduciary responsibility is all about process. Set up appropriate process and follow it diligently.
2. Determine all fiduciaries for your plan and set up a Fiduciary Committee with every fiduciary part of this committee. The committee needs to have a charter, with defined purpose, structure, duties, meeting time, place, frequency, and guidelines. Minutes need to be taken with notes of all discussions and how decisions were arrived at documented.
3. The Fiduciary Committee needs to create a checklist of all their duties and follow it on a routine basis.
4. The Fiduciary Committee needs to formally review plan documents and create a policy for ongoing reviews, similarly with respect to the Plan Investment Policy.
5. The Fiduciary Committee needs to create initially selection criteria for selecting service providers and update on an ongoing basis. They need to monitor all service providers based on these same criteria and against preset benchmarks. If a service provider doesn´t measure up, the committee needs to act swiftly.  Such service providers include trustees, administrators, investment managers, consultants and parties of interest.
6. The Fiduciary Committee members need to all be bonded and insured. They need to monitor each other in addition to making sure they are performing their required duties. It is a common situation that fiduciaries often hold multiple roles at corporations. Irrespective of their other roles, they cannot avoid their roles of fiduciaries. If they do, they need to be asked to formally step down from this role and be replaced with somebody who will accept the responsibility. A Fiduciary must ensure that any replacement is performing the role he wishes to relinquish, before he can be absolved from any liability.
7. The Fiduciary Committee needs to analyze, analyze, analyze. All funds provided as options to participants need to be analyzed. Proper diversification needs to be accomplished at all times. The number of funds should not be too large as to confuse the participants nor too small so as not to provide enough protection and diversification. Try and make sure that asset allocations work together and measure against Plan Investment Policy in addition to benchmarks. It is not enough to say that we are making x % returns, when your Investment Policy says you will make x 2%. You need to interview your Investment Managers for any conflicts of interest.
8. The Fiduciary Committee needs to check the likely places for fiduciary exposure including plan administration, plan oversight and monitoring of service providers on a regular basis.
9. The Fiduciary Committee should retain any experts they need in order to help them perform their functions. Not knowing enough is not an acceptable reason.
10. The Fiduciary Committee needs to follow the smell test. If something doesn´t smell quite right, they need to investigate it. And they need to correct any suspected oversights in an expedient manner.