Fiduciary Considerations for Retirement Plan Sponsors

Risks and responsibilities plan sponsors need to know

Any company that sponsors a retirement plan faces fiduciary obligations mandated by the Employee Retirement Income Security Act of 1974 (ERISA). To avoid potentially substantial legal and regulatory costs and reputational risk—as well as possible plan disqualification and harm to plan participants—plan sponsors and their fiduciaries need to be diligent in understanding and fulfilling those obligations.

Federal laws require retirement plans subject to ERISA to have a fiduciary because someone must be in charge of the plan on an ongoing basis.

ERISA defines fiduciary duties. Some include:

  • Appointing other plan fiduciaries or service providers
  • Selecting plan investments
  • Denying or approving claims
  • Interpreting the plan 

According to ERISA rules, the written terms for each covered plan should name and describe the duties of at least one named fiduciary. Many prototype plans include the employer as a named fiduciary. Within the plan, the named fiduciary may have the ability to appoint a plan administrator, who has the fiduciary duties for much of the plan’s day-to-day administration. In many plans, the plan administrator remains the employer. 

Delegating duties

For many plans, fiduciary responsibility is commonly delegated to:

  • A retirement committee appointed to absorb most of the named fiduciary duties of the plan
  • Various individuals appointed to be plan administrators
  • Outside trustees who hold the assets and assist with aspects of plan administration
  • Investment advisors retained to manage the investment selection and monitoring of plan assets

You might be thinking: If I'm an employer, can I simply delegate all the fiduciary duties and sit back?

Unfortunately, no. Directors remain fiduciaries to the extent they have responsibil­ity for any fiduciary functions. If the directors have the authority to select other plan fiduciaries, this is a fiduciary act. Does this mean the full weight of the plan's fiduciary duties fall on the shoulders of any director who makes these decisions? No, but his or her fiduciary responsibilities and liability remain constant for certain acts. A director in this case would be liable for:

  • The selection and retention of other fiduciaries
  • Any other obligations specified in the plan document
  • Breaches of any other plan fiduciaries (that is, "co-fiduciaries") to the extent the director knew or should have known about the breach and did not act to correct the problem

Continuing education

Continu­ing education is the key to understanding the complex maze of ERISA fiduciary duties.

Fiduciary continuing education cannot be solved by a one-size-fits-all program. Look for a solution designed to fit the needs of your directors. Some of the features of training could include:

  • Dialogue concerning key fiduciary risks for your organization's ERISA plans, non-profit governance or both
  • Practical identification of fiduciary risks and methods to mitigate them
  • Discussion of proper internal controls for fiduciary processes
  • Convenient scheduling to meet the needs of your board
  • Expertise from attorneys well versed in fiduciary management

Related topics

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As a retirement plan sponsor, knowing how to assess plan health is the only way to ensure your plan will be successful.

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• Are not FDIC or any other Government Agency Insured • Are Not Bank Guaranteed • May Lose Value

Truist, BB&T®, BB&T Securities®, BB&T Sterling Advisors, Sterling Capital®, BB&T Investments, BB&T Scott & Stringfellow®, SunTrust®, SunTrust PortfolioView, SunTrust Robinson Humphrey®, SunTrust Premier Program®, AMC Pinnacle®, AMC Premier®, Access 3®, Signature Advantage Brokerage, Custom Choice Loan®, SunTrust SummitView® and GFO Advisory Services® are service marks of Truist Financial Corporation. All rights reserved. All other trademarks are the property of their respective owners.

Services provided by the following affiliates of Truist Financial Corporation: Banking products and services, including loans and deposit accounts, are provided by SunTrust Bank and Branch Banking and Trust Company, both now Truist Bank, Member FDIC. Trust and investment management services are provided by SunTrust Bank and Branch Banking and Trust Company, both now Truist Bank, and SunTrust Delaware Trust Company. Securities, brokerage accounts and /or insurance (including annuities) are offered by SunTrust Investment Services, Inc. and BB&T Securities, LLC, and P.J. Robb Variable Corp., which are SEC registered broker-dealers, members FINRA, SIPC, and a licensed insurance agency where applicable.  Investment advisory services are offered by SunTrust Advisory Services, Inc., GFO Advisory Services, LLC, BB&T Securities, LLC, Sterling Capital Management, LLC, Precept Advisory Group, LLC, and BB&T Institutional Investment Advisors, Inc., each SEC registered investment advisers.  BB&T Sterling Advisors, BB&T Investments and BB&T Scott & Stringfellow are divisions of BB&T Securities, LLC.   Mutual fund products are advised by Sterling Capital Management, LLC. Mortgage products and services are offered through SunTrust Mortgage, a tradename for SunTrust Bank now Truist Bank.

The information contained herein is for informational purposes only and does not represent an official statement of your SunTrust Investment Services, Inc. account. Please refer to your monthly or quarterly statements for a complete record of your transactions, holdings, and balances.

"SunTrust Advisors" may be officers and/or associated persons of the following affiliates of Truist Financial Corporation: SunTrust Bank now Truist Bank, our commercial bank, which provides banking, trust and asset management services; SunTrust Investment Services, Inc., a registered broker-dealer, which is a member of FINRA and SIPC, and a licensed insurance agency, and which provides securities, annuities and life insurance products; SunTrust Advisory Services, Inc., a SEC registered investment adviser which provides Investment Advisory services.

SunTrust Private Wealth Management, International Wealth Management, GenSpring, Business Owner Specialty Group, Sports and Entertainment Group, and Legal and Medical Specialty Groups are marketing names used by SunTrust Bank now Truist Bank, SunTrust Investment Services, Inc., and SunTrust Advisory Services, Inc.

SunTrust Robinson Humphrey is the trade name for the corporate and investment banking services of Truist Financial Corporation and its subsidiaries, including SunTrust Robinson Humphrey, Inc., member FINRA and SIPC.

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