401k Fiduciaries have a lot of responsibilities. It's important to understand these responsibilities in order to better serve plan participants and their beneficiaries.
Welcome back. We're Going to talk a little bit about fiduciary responsibilities today, and a lot of what we're going over is found on the Department of Labor website.
So what does it mean to be a fiduciary? Fiduciary comes from the Latin word Fiducia, which means trust. In retirement plans, there is a lot that can be outsourced, but there still has to be a fiduciary or a procedure to identify a named fiduciary.
In 2017 the Department of Labor put out a piece called "Meeting Your Fiduciary Responsibilities", and in this piece, they outline five bullet points that highlight your responsibilities as a fiduciary in a retirement plan. The 1st one is acting solely in the interest of participants and their beneficiaries and with the exclusive purpose of providing benefits to them. If you're using a service provider just because they're a family member or a golfing buddy, it may make sense to take a step back and make sure that person is the most qualified to benefit the participants and their beneficiaries.
Another point is to carry out your responsibilities with prudence, so you need to exercise judgment in the decisions that you're making. A third point is to follow plan documents when mistakes happen, the Department of Labor and the IRS have programs to make corrections. If you come across potential errors, it may make sense for you to either reach out to your third party administrator or to an Aris attorney to see how that could be corrected.
Another point is to diversify plan investments. A lot of plans, Air Participant directed, meaning the participant gets to decide which investments they want to invest in. But if you are the one who is driving the plan, you very well may have the responsibility of making sure there are good investments to choose from. A diverse selection for participants to utilize. the last point is paying only reasonable plan expenses. This is why it's so important to periodically benchmark your plan and get proposals from other providers. You want to make sure you're not overpaying for the services that are rendered oftentimes is plans grow. The fees of different providers become more competitive, and not all service providers air proactive in reducing their fees. As the plan grows.
As a fiduciary over a plan, there come some personal liabilities for the decisions you make. And that is why it is important to have a process in your selection of service providers and also to document why you chose the service providers and the company's you're utilizing to help you with your 401K.