PLANSPONSOR - June/July 2021 - 38
BEST PRACTICES | PLAN COMMITTEES
have been adopted. Too often, clients
look at a plan document only to discover
they are missing an important amendment
that would have rectified a provision
now at issue. For prototype plans,
the plan document generally means the
base document, the adoption agreement
and any amendments.
The failure to follow the plan's terms,
even when doing so benefits participants,
is an operational error. If discovered on
audit by the IRS, this can lead to costly
penalties and possibly even plan disqualification.
OK, plan disqualification is
While fiduciary training is not required
by ERISA, whether the plan provides it is
a question the DOL asks during investigations.
If the answer is " no, " there is no
penalty or violation, but we expect that the
DOL may look closer at how the committee
operates, in order to determine whether a
fiduciary breach has occurred. Further,
plan fiduciaries often must receive fiduciary
training pursuant to litigation settlements
and DOL enforcement actions.
Plan sponsors benefit from fiduciary
training in that it ensures committee
The failure to follow the plan's
terms, even when doing so benefits
participants, is an operational error.
pretty draconian and rare-we've never
seen it-but the cost associated with it
is generally the IRS' starting point when
determining the appropriate penalty.
Besides understanding the plan
document and what it provides, the
committee should regularly review other
plan-related documents including the
investment policy statement (IPS).
Investment policy statements are
not required but can be a great guide for
the committee in selecting investment
options and can be evidence of its good
But-and this is a big but-having an
IPS the committee doesn't follow is worse
than not having one at all. If the IPS says
funds will be replaced after three quarters
on the watch list and the committee
doesn't do that, you arguably have a fiduciary
breach even if there's a good reason
not to replace the fund.
To avoid issues such as this, we
recommend: 1) that the IPS be drafted
as guidelines for the committee to use in
its investment selection and monitoring
process rather than as hard and fast rules,
and 2) that the statement be reviewed on
a regular basis.
38 PLANSPONSOR.COM June - July 2021
members understand their duties and
When should committee members
receive the training? New members
should be trained as soon as possible.
But it's a lot of information to cover,
and it doesn't always stick the first time.
Annual or periodic refresher sessions
going over fiduciary rules and responsibilities
can help committee members
stay out of trouble.
Including a regular fiduciary/legal
update on the agenda for each quarterly
meeting also helps. You can invite your
attorneys to attend and present. There are
many 401(k) and 403(b) fiduciary litigation
cases going on now, and committee
members should know what the issues
are and what those may mean for their
Two key ERISA fiduciary concepts
should be highlighted as part of the
training. First, when making fiduciary
decisions, committee members must
act solely in the interest of the plan
participants and beneficiaries.
Second, process, process, process.
The committee must go through a good
process, gathering and considering all of
the relevant information for purposes of
making fiduciary decisions. These two
key concepts should be intertwined with
the following specific topics:
* Understanding the fiduciary role.
This covers, specifically, when the committee
members act as fiduciaries vs. when
they act as the employer/settlor of the plan,
without a fiduciary responsibility.
* Fiduciary governance. Part of the
training should explain the flow of fiduciary
responsibilities and who has which
ones. For example, the board of directors
may delegate plan administration
authority to the committee. This means
the committee must report back to the
board periodically so the latter can monitor
its fiduciary delegation.
* Monitoring fees and service
In addition to selecting the
plan's service providers, the committee
has an ongoing duty to monitor those
providers and their fees for reasonableness.
Training can be a good way to drive
home the importance of this duty and
also to highlight, for example, what may
and may not be paid by the plan.
* Plan documentation. Often overlooked
is the committee's obligation to
follow the plan's governing documents-
e.g., plan document, IPS, etc.
* Fiduciary liability, including co-fiduciary
liability. Fiduciary training is the
time to explain the personal liability that
attaches to a fiduciary's breach as well as
to a co-fiduciary's breach if the fiduciary
is aware of an issue and takes no steps to
* Prohibited transactions. ERISA
prohibits transactions between the plan
and " parties in interest " as well as selfdealing.
Suffice it to say this is another
set of rules the committee must follow.
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.
PLANSPONSOR - June/July 2021
Table of Contents for the Digital Edition of PLANSPONSOR - June/July 2021
2021 Plan Sponsor of the Year Winners
2021 Recordkeeping Survey
The Right Provider Team
For the Best Collaboration
2021 PLANSPONSOR Service Stars
PLANSPONSOR - June/July 2021 - Cover1
PLANSPONSOR - June/July 2021 - Cover2
PLANSPONSOR - June/July 2021 - 1
PLANSPONSOR - June/July 2021 - 2
PLANSPONSOR - June/July 2021 - 3
PLANSPONSOR - June/July 2021 - 4
PLANSPONSOR - June/July 2021 - 5
PLANSPONSOR - June/July 2021 - 6
PLANSPONSOR - June/July 2021 - 7
PLANSPONSOR - June/July 2021 - 8
PLANSPONSOR - June/July 2021 - 9
PLANSPONSOR - June/July 2021 - 2021 Plan Sponsor of the Year Winners
PLANSPONSOR - June/July 2021 - 11
PLANSPONSOR - June/July 2021 - 12
PLANSPONSOR - June/July 2021 - 13
PLANSPONSOR - June/July 2021 - 14
PLANSPONSOR - June/July 2021 - 15
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PLANSPONSOR - June/July 2021 - 19
PLANSPONSOR - June/July 2021 - 20
PLANSPONSOR - June/July 2021 - 21
PLANSPONSOR - June/July 2021 - 2021 Recordkeeping Survey
PLANSPONSOR - June/July 2021 - 23
PLANSPONSOR - June/July 2021 - 24
PLANSPONSOR - June/July 2021 - 25
PLANSPONSOR - June/July 2021 - 26
PLANSPONSOR - June/July 2021 - 27
PLANSPONSOR - June/July 2021 - 28
PLANSPONSOR - June/July 2021 - 29
PLANSPONSOR - June/July 2021 - 30
PLANSPONSOR - June/July 2021 - 31
PLANSPONSOR - June/July 2021 - The Right Provider Team
PLANSPONSOR - June/July 2021 - 33
PLANSPONSOR - June/July 2021 - 34
PLANSPONSOR - June/July 2021 - 35
PLANSPONSOR - June/July 2021 - For the Best Collaboration
PLANSPONSOR - June/July 2021 - 37
PLANSPONSOR - June/July 2021 - 38
PLANSPONSOR - June/July 2021 - 2021 PLANSPONSOR Service Stars
PLANSPONSOR - June/July 2021 - 40
PLANSPONSOR - June/July 2021 - Cover3
PLANSPONSOR - June/July 2021 - Cover4