CPA & Business Advisory Blog

Employee Benefits: DOL Requirements for Fiduciaries

Posted on Wednesday, February 29th, 2012 by

In the past week I’ve received three articles from colleagues related to benefit plan sponsors receiving fines.  The majority of these articles seem focused on fiduciaries not taking responsibility over plan operations or the lack of documentation of fiduciaries’ consideration when making decisions that affect the plan.  So, I thought I’d take a moment to summarize some of the requirements shown on the Department of Labor (DOL) website in relation to fiduciary responsibility.  Please remember, there are requirements by the IRS and the DOL in relation to compliant plan operations. This blog will only focus on a simplified overview of the DOL’s requirements for fiduciaries.

Fiduciary Status

According to the DOL’s website “fiduciary status is based on the functions performed for the plan, not just a person’s title.”  Therefore a person’s title could be Benefits Specialist, but if they are not executing the decisions that are being made in relation to the plan they may not actually be a fiduciary.  A plan needs at least one fiduciary designated in the plan document, however, there can be multiple fiduciaries in a plan since fiduciaries can include anyone who has discretion over the plan or control over the plan’s assets. 

Fiduciary Responsibilities

The initial step for companies who are sponsoring benefit plans should be to identify the plan’s fiduciaries. 

Once the fiduciaries have been identified they should consider what their responsibilities entail as described by the DOL.  These responsibilities include:

  • Acting solely in the interest of plan participants and their beneficiaries with the exclusive purpose of providing benefits to them;
  • Carrying out their duties prudently;
  • Following the plan documents (unless inconsistent with ERISA);
  • Diversifying plan investments; and
  • Paying only reasonable plan expenses.

And then of course an auditor’s favorite step …

Document! Document! Document!

It doesn’t matter what a fiduciary says they are doing if it can’t be proven and therefore audited. 

Additional Tips

A few additional tips:  take detailed meeting minutes and show how the selection of plan investments were decided (Who was consulted?  Whose advice was used?), note how the plan document was considered when making crucial decisions, and if issues arise, document carefully how these issues were resolved.  Check out the DOL’s website for additional tips and guidance or ask your third party service providers if they have suggestions for staying compliant with the DOL – http://www.dol.gov/ebsa/publications/fiduciaryresponsibility.html

To learn more about Skoda Minotti’s Employee Benefit Plan Audit Group, contact Marilea Campomizzi at 440-449-6800. For the most effective way to limit your fiduciary risk, we recommend the Modern 401k from Aurum Wealth Management Group.  

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