Do you know who in your business is considered a fiduciary of a company’s 401(k) plan?

Under ERISA guidelines, fiduciaries are anyone with discretionary authority or control over the management of the plan or its assets. This includes individuals with the following roles or titles:

• Plan Sponsors – Commonly the CEO, CFO, or Business Owner

• Plan Administrators – Typically a Benefits Manager, HR Director, or Controller

• Investment Committee Members – Often senior leadership such as Executive Officers or Finance Committee Members

• Trustees of the Plan – Usually Board Members or specially designated Trust Officers

As a fiduciary overseeing your company’s 401(k) or other employer-sponsored retirement plan, you carry significant responsibilities that directly impact the financial wellness of your employees and the compliance of your plan. Ensuring that you follow fiduciary best practices is essential for managing risk, optimizing plan performance, and safeguarding against costly errors or litigation.

With over a decade of experience in plan administration and ERISA compliance, I’ve seen firsthand the complexities and challenges fiduciaries face. Whether it’s making investment decisions, monitoring service providers, or ensuring that you meet regulatory obligations, each decision you make must align with the best interests of your plan participants.

Below is a comprehensive checklist designed to help you stay on track with your fiduciary duties. By following these steps, you can address risk, manage compliance, and provide a high-quality retirement plan for your employees.

Fiduciary Checklist

1. Basic Fiduciary Duties

• Plan Governance: Are you acting in accordance with the documents and instruments governing the plan? 

• Written Procedures: Do you have written procedures for key fiduciary decisions, such as selecting investments or hiring service providers?

• Investment Oversight: Have you established an Investment Policy Statement (IPS) to guide your investment decisions and monitor plan performance?

Your responsibility as a fiduciary means that you must always act in the best interest of your participants and beneficiaries. This includes developing a well-documented, prudent process for decision-making and ensuring that these processes are consistently followed.

2. Investment Oversight

• Responsibility: Do you clearly know who is responsible for making investment decisions within your plan?

• Policy Documentation: Is your IPS updated, and does it outline the plan’s investment processes and requirements?

• Fiduciary Records: Are you documenting all meetings, discussions, and decisions related to plan investments to demonstrate your adherence to a prudent process?

Your 401(k) plan’s investments should not only meet performance benchmarks but should also comply with fiduciary standards. A robust IPS and thorough documentation are critical for protecting both your plan and yourself from future scrutiny.

3. Service Provider Oversight

• Periodic Review: Do you regularly review your service providers to ensure they are meeting their performance standards?

• Fee Review: Have you assessed the reasonableness of service provider fees, and do you document any fee negotiations or conflicts of interest?

• ERISA Compliance: Are you familiar with Section 408(b)(2) of ERISA, which requires you to determine whether plan fees are reasonable in light of the services provided?

Regularly reviewing service providers is crucial for ensuring your plan participants receive the best value and service. Document these reviews thoroughly, as they provide important evidence that you are acting in the best interest of the plan.

4. Fiduciary Liability

• Process Documentation: Are you maintaining a well-documented fiduciary process, including showing that decisions were prudently made and acted upon?

• Legal Counsel: Have you consulted with legal counsel to ensure compliance with ERISA and other retirement plan regulations?

• Liability Management: Have you obtained fiduciary liability insurance to help protect against litigation costs and hired a 3(38) Investment Fiduciary for the plan?

Fiduciary liability is a serious concern. By keeping thorough records, seeking expert advice when necessary, ensuring that you have the appropriate liability insurance, and hiring a 3(38) Investment Fiduciary, you can help mitigate these risks.

5. Plan Administrator Responsibilities

• Compliance Calendar: Do you have a compliance calendar to track key deadlines, such as filing Form 5500 and nondiscrimination testing?

• Plan Documents: Have you reviewed your plan documents to ensure they reflect current practices and recent regulatory updates?

• Benchmarking: Do you periodically benchmark your plan’s fees and services against industry standards to ensure they remain reasonable?

Effective administration is the backbone of a successful retirement plan. Keeping your plan compliant and well-documented helps ensure that you are meeting your fiduciary obligations and protecting both the plan and its participants.

6. Employee Support and Education 

• Participant Communication: Are you providing ongoing communications about the plan’s investment options, features, and any regulatory changes?

• Educational Programs: Do you offer educational meetings or materials to help employees make informed decisions about their retirement savings?

• Automatic Enrollment: Have you implemented automatic enrollment with a qualified default investment alternative (QDIA) to simplify participation for your employees?

A well-designed plan also supports your employees’ financial literacy and encourages participation. Providing educational resources and clear communications helps participants make the most of their retirement savings.

Feeling Overwhelmed by Responsibility?

If you’re uncertain about your fiduciary responsibilities or feel behind on these tasks, you’re not alone. Managing a retirement plan is complex, and mistakes can be costly. At Gatewood Wealth Solutions, we specialize in providing ERISA 3(38) Investment Manager services. A 3(38) Investment Fiduciary takes on the responsibility for plan investments and helps ensure your plan operates in compliance with all regulatory requirements.

As a Certified Plan Fiduciary Advisor (CPFA®) with years of experience in retirement plan management, I can help you navigate these responsibilities and help ensure that your plan is positioned for success. Whether you need assistance with investment oversight, compliance, or participant education, our team is here to support you.

Let’s schedule a time to discuss how we can assist you in managing your plan and protecting your business. Reach out today for a complimentary consultation.

Important Disclosures:

This information was developed as a general guide to educate plan sponsors but is not intended as authoritative guidance or tax or legal advice.  Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.  In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC