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In every retirement plan, there are individuals or groups of people who use
their own judgment or discretion in administering and managing the plan or
who have the power to or actually control the plan’s assets. These
individuals or groups are called plan fiduciaries. Fiduciary status is based
on the functions that the person performs for the plan, not just the
person’s title.
Does your plan have to identify those responsible for operating the plan?
A plan must name at least one fiduciary in the written plan document, or
through a process described in the plan, as having control over the plan’s
operations. This fiduciary can be identified by office or by name. For some
plans, it may be an administrative committee or the company’s board of
directors. Usually, a plan’s fiduciaries will include the trustee,
investment managers, and the plan administrator. The plan administrator is
usually the best starting point for questions you might have about the plan.
What are the responsibilities of plan fiduciaries?
Fiduciaries have important responsibilities and are subject to certain
standards of conduct because they act on behalf of the participants in the
plan. These responsibilities include:
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Acting solely in the interest of plan participants and their
beneficiaries, with the exclusive purpose of providing benefits to them
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Carrying out their duties with skill, prudence, and diligence
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Following the plan documents (unless inconsistent with ERISA)
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Diversifying plan investments
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Paying only reasonable expenses of administering the plan and investing
its assets
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Avoiding conflicts of interest.
The fiduciary also is responsible for selecting the investment providers and
the investment options, and for monitoring their performance. Some plans,
such as most 401k or profit sharing plans, can be set up to permit
participants to choose the investments in their accounts (within certain
investment options provided by the plan). If the plan is properly set up to
give participants control over their investments, then the fiduciary is not
liable for losses resulting from the participant’s investment decisions.
Department of Labor rules provide guidance designed to make sure
participants have sufficient information on the specifics of their
investment options so they can make informed decisions. This information
includes:
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A description of each investment option, including the investment goals,
risk, and return characteristics
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Information about any designated investment managers
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An explanation of when and how to request changes in investments, plus
any restrictions on when you can change investments
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A statement of the fees that may be charged to your account when you
change investment options or buy and sell investments
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The name, address, and telephone number of the
plan fiduciary or other
person designated to provide certain additional information on request.
A statement that the plan is intended to follow the Department of Labor
rules and that the fiduciaries may be relieved of liability for losses that
are the direct and necessary result of a participant’s investment
instructions also must be included.
What if a plan fiduciary fails to carry out its responsibilities?
Fiduciaries that do not follow the required standards of conduct may be
personally liable. If the plan lost money because of a breach of their
duties, fiduciaries would have to restore those losses, or any profits
received through their improper actions. For example, if an employer did not
forward participants’ 401k contributions to the plan, they will have to pay
back the contributions to the plan as well as any lost earnings, and return
any profits they improperly received. Fiduciaries also can be removed from
their positions as fiduciaries if they fail to follow the standards of
conduct.
When does the employer need to deposit employee contributions in the
plan?
If you contribute to your retirement plan through deductions from your
paycheck, then the employer must follow certain rules to make sure that it
deposits the contributions in a timely manner. The law says that the
employer must deposit participant contributions as soon as it is reasonably
possible to separate them from the company’s assets, but no later than the
15th business day of the month following the payday. In the Annual Report
(Form 5500), the plan administrator is required to include information on
whether deposits of contributions were made on a timely basis. For more
information, see the Department of Labor’s Ten Warnings Signs That Your 401k
Contributions Are Being Misused at www.dol.gov/ebsa for indicators of
possible delays in depositing contributions.
What are the plan fiduciaries’ obligations regarding the fees and
expenses paid by the plan? Can the plan charge my defined contribution plan
account for fees?
Plan fiduciaries have a specific obligation to consider the fees and
expenses paid by your plan for its operations. ERISA’s fiduciary standards,
discussed above, mean that fiduciaries must establish a prudent process for
selecting investment alternatives and service providers to the plan; ensure
that fees paid to service providers and other expenses of the plan are
reasonable in light of the level and quality of services provided; select
investment alternatives that are prudent and adequately diversified; and
monitor investment alternatives and service providers once selected to see
that they continue to be appropriate choices.
The plan may deduct fees from your defined contribution plan account. Plan
administration fees and investment fees can be deducted from your account
either as a direct charge or indirectly as a reduction of your account’s
investment returns. Fees for individual services, such as for processing a
loan from the plan or a Qualified Domestic Relations Order, also may be
charged to your account.
Action Item
If you have any questions about the management of the plan and its
assets, contact your plan administrator.
For more information or to have us answer any questions you may have,
please call 1-800-559-2900,
,
see our
contact Atlantic Financial
page,
or use this form to contact us:
Source
U.S. Department of Labor
(www.dol.gov)
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