Can you check all these boxes as a 401(k) plan fiduciary? This is a great way to make sure you’ve taken all the steps needed to responsibly administer your company 401(k) plan. This checklist is a fiduciary best practice guide for all 401(k) plan managers.
Below is a checklist of ongoing best practices for all 401(k) plan fiduciaries to consider. This list may not be comprehensive, for further guidance and information consult your ERISA counsel.
How do I know if I am a Fiduciary?
Do your duties cause you to exercise discretion over plan assets or administration (hiring service providers, making investment choices, spending plan assets, etc.). If so, you are a fiduciary and need to make sure you understand and comply with your duties.
Mitigating Fiduciary Liability
- Consider establishing procedures for delegating fiduciary authority. For example, hiring a 3rd party to act as a 3(38) investment manager or 3(16) administrator for your plan.
- Provide fiduciary education for new fiduciaries as well as continuing education for all fiduciaries. Many plan service providers will offer resources to help with fiduciary education.
- Find out who is responsible for directing investments in your plan
- Consider setting up a formal investment committee if you don’t have one
- Consider developing an investment policy statement (IPS) documenting all of the plan’s investment requirements and processes.
- Consider engaging an independent fiduciary (like a 3(38) investment manager, or a 3(21) investment advisor) to help monitor the appropriateness of all investments options.
Overseeing Service Providers
- Conduct a periodic review of service providers to ensure that service and performance standards are being met.
- Periodically benchmark your plan’s fees and services to make sure expenses are reasonable for services rendered.
- Document the review, including meetings, issues discussed, and any decisions made.
- Familiarize yourself with the requirements of Section 408(b)(2) of ERISA.
- Conduct an in-depth review of service providers periodically to ensure that your fess and arrangements are consistent with current practices and costs and to determine whether a new request for proposal process is warranted.
- Assess the reasonableness of fees and whether any conflicts exist.
- Talk to your service providers about providing required participant disclosures.
- Provide ongoing communications on investments and plan features (e.g., loans, distributions, or contributions).
- Make sure all communications are accurate.
- Distribute information to all eligible employees regarding the investment options available under the plan.
- Consider conducting educational meetings and providing general financial information and investment education.
- Consider using automatic enrollment with a qualified default investment alternative (QDIA).
Plan Administrator Basics
- Develop a compliance plan or calendar to keep track of the various deadlines throughout the plan year.
- Periodically review the plan documents to ensure that they reflect current practices and have been updated for legal and regulatory changes.
- Complete and file all required government reporting, such as the Form 5500.
- Comply with the applicable Internal Revenue Code nondiscrimination tests.
- Review the process for achieving the following in a timely manner:
- Collecting employee contributions and loan repayments
- Forwarding contributions and loan repayments to the service provider, and
- Investing the contributions and loan repayments
Fiduciary Liability/DOL Audit
- Maintain a well-documented, prudent fiduciary process for decision-making. (Consider including documentation that decisions were actually made.)
- Consider obtaining liability insurance that protects plan fiduciaries from the costs associated with litigation (including unfavorable judgements)
- Designate a point person (often an in-house or outside attorney) to coordinate and work with the Department of Labor (DOL) in the event of an investigation.
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