I just finished reading the PlanAdvisor article, "Basic Fiduciary Education Still Critical" and listened to the DOL's webinars on Fiduciary Responsibility and decided to write a series on Fiduciary Basics based on the webinars.   So if you missed out, here are some of the highlights.

Getting insight directly from the regulator themselves as to what is important is critical in understanding and preparing for an exam or to help prevent litigation.  They stressed many things.  One of the first issues was very basic - understanding the difference between a business (settlor’s) decision and a fiduciary decision. 

The very first decision any Board of Directors decides regarding a retirement plan is whether or not they even want a retirement plan.  They will initiate a plan design study or focus group to decide what the Plan will offer to the participants and agree/vote upon the plan document.  These are business decisions which should not be paid for with plan assets.  

Once this vote occurs, how and when it will be implemented are fiduciary decisions by the plan’s fiduciaries.  

Same is true for amendments.  Amendments, such as the decision to offer loans under the plan, is a business decision.  The DOL states that it is this type of decision is a business decision and thus you cannot use participant monies to pay for the any studies done in order to make this decision or to amend the document.   Once the plan has been amended, decisions concerning loans such as interest rates and duration of the loans are all fiduciary decisions.

If it is IN the plan document, it is the responsibility of the fiduciaries to make sure it is implemented prudently and completely.  They must oversee all the aspects of the plan. 

A simple rule of thumb, the Corporate Board gets involved to create the plan and the plan document, to amend the plan to add or remove features, or to close the plan.    Once it is in the plan document, the decisions and responsibilities fall to the plan fiduciaries.

Next in the Series – Fiduciary Monitoring/Oversight Responsibilities