Fiduciary fundamentals and best practices
As you start planning for the year ahead, it’s a good time to review fiduciary responsibilities and processes to ensure you are carrying out your fiduciary obligations in the most prudent and effective way. This article reviews the definition of fiduciary, best practices and resources available to help fiduciaries better understand and fulfill this important role.
Who is a fiduciary?
The Employee Retirement Income Security Act (ERISA) defines a fiduciary as any person or entity that has discretionary authority over plan investments, exercises any control over plan assets, gives investment advice for compensation or has discretion over plan administration.
Plan sponsors are generally fiduciaries. For some plans, administrative committees or a company’s board of directors may be fiduciaries. A person or entity becomes a fiduciary based on the functions they perform no matter what titles or positions they hold.
Best practices to consider:
- Identify all plan fiduciaries in your organization and assure they are aware of their responsibilities. At a minimum, a plan must have at least one fiduciary designated in the plan document. In addition, be sure to understand the fiduciary or non-fiduciary status of the plan service providers your company works with.
- Maintain a written investment policy statement and review it at least annually.
- Take advantage of fiduciary safe harbors, which can protect fiduciaries from liability associated with certain investment decisions.
- Periodically review fees and expenses for reasonableness.
- Maintain fiduciary liability insurance for an additional layer of protection.
- Educate and update participants with clear, consistent communications.
- Maintain a regular governance calendar.
- Demonstrate procedural prudence by maintaining written policies and procedures, minutes or other documentation of actions and decisions. It is also important to maintain supporting documents and data used in the decision-making process.
At Bank of America, we recognize the significant responsibility of a fiduciary and have resources dedicated to support plan fiduciaries in better understanding and fulfilling their roles, including our on-demand fiduciary education series and Fiduciary Fundamentals Basics and Best Practices brochure.
Fiduciary education series is an on-demand, online training broken into four brief 10-minute episodes, offering a convenient way to get helpful information. It also includes a link to our fiduciary fundamentals brochure, an in-depth guide that outlines the fiduciary role and best practices.