Fiduciary Responsibility
A fiduciary is someone who makes decisions on behalf of someone else. An employer or executive officer of a company‚ who acts as a plan trustee for the company’s retirement plan‚ is a fiduciary because he or she makes decisions on behalf of the plan participants.
Reducing the Threat of Lawsuits
No one cannot eliminate the threat of a lawsuit entirely. However‚ the trustee should endeavor to reduce the
company’s exposure by being proactive in his or her diligence in providing employees with a well-designed retirement plan.
The plan should include features such as investment education‚ financial tools‚ and a selection of asset allocation models which provide diversified exposure to all major asset classes. Other steps a trustee may take:
Monitoring Fees: ERISA § 404(a)(1)(A) makes it clear that plan sponsors have a duty to defray costs.
Alex Herman‚ former Secretary of Labor‚ expressed the Department of Labor’s concern regarding excessive fees: “Fees and expenses can result in lower retirement income for workers.”
Selection of Investment Options:
Unless the plan trustees turn over full discretion for the selection and monitoring of the investment options to a 3(38) investment manager‚ the plan trustees can never be relieved of their fiduciary duty for the selection of the investment options made available to employees. Given this duty‚ trustees must exercise due diligence in the selection process and monitor investment performance against their respective benchmarks.