Here’s The Scoop On Fiduciary Responsibility – Rea CPA

Here’s The Scoop On Fiduciary Responsibility

How To Manage Your Retirement Plan With Fiduciary Responsibility

As a business owner you will face challenges that require a significant contribution of your own time and input. However, when it comes to certain aspects of your business, you can’t afford to go it alone. Consulting with experienced professionals is crucial. Therefore, I recommend that all retirement plans should be handled by those who understand the gravity associated with fiduciary responsibility to ensure the plan is properly managed.

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What Is Fiduciary Responsibility?

The Employee Retirement Security Act (ERISA) sets the principles of conduct for those who manage employee benefit plans as well as the plan’s assets. A fiduciary, according to ERISA, is defined as any person who:

  • Exercises discretionary authority over a plan’s management or assets.
  • Has any discretionary authority or responsibility in the administration of the plan.
  • Has the authority to gives plan participants investment advice for compensation.

In your business’s written plan document, at least one fiduciary (person or entity) must be named. Usually, your plan’s fiduciaries will include the plan sponsor, plan administrator, trustee(s) and investment advisors. Once named, these fiduciaries have the responsibility to:

  • Act solely in the interest of plan participants and their beneficiaries for the exclusive purpose of providing benefits to them.
  • Fulfill their duties carefully and with caution.
  • Diversify plan assets to reduce the risk of substantial losses.
  • Follow the plan documents consistent with ERISA.
  • Avoid conflicts of interest.
  • Pay only reasonable plan expenses

What Other Roles Do Fiduciaries Have?

With any retirement plan, there are specific duties that must be fulfilled by individuals other than the named fiduciary. For example, the plan’s trustee has fiduciary responsibility with the exclusive authority and discretion to control the assets in a plan while the entity that establishes the plan (usually the employer) serves as the plan administrator. The plan administrator is in charge of any other fiduciary responsibilities not taken on by the plan’s trustee. On the other hand, those who exclusively perform departmental tasks associated with the plan, are not given fiduciary responsibility.

For additional information about the importance of meeting your fiduciary responsibilities and effectively managing your company’s retirement plan, email Rea & Associates to be put into contact with a member of our retirement plan services team.

By Kelly Leslie, CPA (Cambridge office)

Check out these additional resources to learn more about the responsibility associated with managing a retirement plan:

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