PLANSPONSOR - June/July 2020 - 46

ERISA EXAMINATION
Fiduciary
Duties Carry On
When it comes to following best practices, it's business as usual
M
any people are still working remotely, and the country's
in a state of unrest, so let's cancel our committee meetings
and meet again when things are more settled. ...
Hopefully, you have read enough of our fiduciary-focused
articles to know we can't possibly mean that. And we don't.
Having a prudent process and then following that process is still
important. In addition, the fiduciary duty to monitor still applies,
and committees should continue to meet regularly, even if holding
the meetings via video or teleconference rather than in person. If
anything, committees may want to hold additional special meetings
as appropriate to address significant new developments.
important, as many participants have sustained actual losses to
plan investments since March. By following its prudent process
of reviewing and considering the plan's investment options, the
committee can support its decision, even if this is to select or
retain options that experience negative returns.
The committee should review the work plan it has develThe
committee should also inquire
as to whether there has been any
participant feedback regarding
the recordkeeper's responsiveness
in light of recent events.
Plan fiduciaries have a duty to monitor the performance
of plan service providers-e.g., the recordkeeper, investment
consultant, investment education and advice provider, managed
account provider, self-directed brokerage account provider,
trustee, etc.-the plan investment options, and fees the plan
pays such as recordkeeping fees. This is an ongoing duty that
doesn't stop because people are busy or working from home. In
fact, this duty to monitor may be needed now more than ever.
Many plan investment options have had returns decline
as a result of the current economic situation. This doesn't
mean a committee must automatically remove an investment
option that has suffered a loss. But it is information that body
should consider as it goes through its regular quarterly review
of the plan's investment lineup. In particular, the committee
may want to discuss with the plan's investment consultant how
the current economic situation is affecting target-date funds
(TDFs), bond funds, money market/stable value funds and
active vs. passive funds.
Going through the process of reviewing and considering the
relevant facts-including current returns and issues resulting
from the pandemic-continues to be important. It's especially
46 PLANSPONSOR.COM June - July 2020
Art by Joseph Ciardiello
oped and make sure all of the plan service providers have been
recently evaluated-the committee also has an obligation to
monitor the plan's service providers. In addition, it's a good time
to assess how the recordkeeper is meeting the added obligations
and requirements of providing and distributing plan communications,
educating plan participants and responding
to participant inquiries.
The committee should also inquire as to
whether there has been any participant feedback
regarding the recordkeeper's responsiveness in light
of recent events. Further, if you haven't done so,
check with the recordkeeper regarding its cybersecurity
policies. With so much of the country working
remotely, and retirement plans trying to accommodate
electronic distribution requests, there may be
increased risk of fraudulent activity. It's important that recordkeepers
have cybersecurity policies and procedures in place to
avoid or minimize such risks. Even if it's not time for a formal
request for proposals (RFP), by monitoring and discussing the
recordkeeper's fees, policies and performance on an ongoing
basis, the committee can demonstrate that it is satisfying its
fiduciary duty to monitor.
Finally, the committee should also consider whether it
makes sense to review the organizations providing investment
advice and/or managed account options to see how these plan
features are actually working.
Keeping minutes of its meetings provides a way for the
committee to prove the fiduciary processes it engaged in. The
minutes should reflect what the group discussed and decided
regarding next steps, as evidence of its process. It is important that
committees remember to document meetings with minutes even
if those meetings are done virtually.
Summer Conley is a partner in the Los Angeles office of Faegre
Drinker Biddle & Reath LLP. Michael Rosenbaum is a partner
in the firm's Chicago office.
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