The Plan Fiduciary’s Role
A 401(k) fiduciary review, also known as a fiduciary assessment or audit, is a process conducted to evaluate and ensure that the fiduciaries responsible for managing a 401(k) plan are fulfilling their duties in compliance with the Employee Retirement Income Security Act (ERISA) regulations.
Here are some key points to understand about 401(k) fiduciary reviews:
1. Fiduciary Duties: Fiduciaries of a 401(k) plan have a legal obligation to act in the best interests of the plan participants and beneficiaries. They are responsible for prudently selecting and monitoring the plan’s investments, managing plan expenses, providing proper disclosures, and making decisions that align with the participants’ retirement goals.
2. ERISA Compliance: The Employee Retirement Income Security Act (ERISA) sets the standards for fiduciary conduct and provides guidelines for the administration and operation of retirement plans, including 401(k) plans. Fiduciary reviews help ensure compliance with ERISA regulations and identify any areas of non-compliance or potential risk.
3. Scope of Review: A fiduciary review typically involves a comprehensive examination of the plan’s operations, governance structure, investment selection and monitoring processes, fee arrangements, participant communications, and other key aspects related to fiduciary responsibility. It may involve assessing plan documents, investment policies, service provider agreements, and internal procedures.
4. Independent Reviewers: Fiduciary reviews are often conducted by independent third-party firms or consultants with expertise in retirement plan compliance and fiduciary matters. These independent reviewers assess the plan’s fiduciary practices and provide recommendations to help ensure compliance, mitigate potential risks, and enhance the overall management of the plan.
5. Ongoing Fiduciary Oversight: Fiduciary reviews are not typically conducted as one-time events but are part of an ongoing process of fiduciary oversight. Regular reviews help ensure that the fiduciaries continuously meet their obligations, adapt to changing regulations, and address any emerging issues that could impact the plan and its participants.
6. Documentation and Reporting: Fiduciary reviews result in a written report that highlights findings, identifies areas of improvement or potential concerns, and provides recommendations for remediation. This report serves as a valuable reference document and can help demonstrate the plan sponsor’s commitment to fulfilling their fiduciary duties.
Fiduciary reviews play a vital role in maintaining the integrity of 401(k) plans and ensuring that fiduciaries act in the best interests of plan participants. They provide a comprehensive assessment of fiduciary practices, help identify and address potential compliance issues, and they promote good governance and oversight of the plan.
