Managing a retirement plan involves more than just offering investment options and collecting contributions. As a plan sponsor or fiduciary, you carry a legal responsibility under ERISA to act in the best interest of plan participants. Following fiduciary best practices helps reduce liability, improve outcomes, and ensure your plan stays compliant.
Here are key fiduciary best practices organized by category to help you govern your plan effectively.
š Plan Design & Documentation
Review Plan Documents Annually
Ensure the plan is administered according to its terms and reflects current regulatory requirements.
Benchmark Plan Fees and Services
Compare your provider’s fees and services to industry benchmarks. When feasible, issue RFPs or RFIs every 3ā5 years.
Evaluate Plan Design for Effectiveness
Assess eligibility criteria, match formulas, auto-enrollment, and other features to support participant savings.
Monitor Compliance with ERISA, IRS, and DOL Rules
Stay current with legal requirements, including nondiscrimination testing and Form 5500 filings.
Maintain an Up-to-Date Investment Policy Statement (IPS)
Use the IPS to guide investment selection and document your decision-making process.
š Investments
Prudently Select and Monitor Investment Options
Use objective criteria to review fund performance, fees, and management tenure.
Offer a Diversified Investment Menu
Provide a range of investment choices, including capital preservation and target-date funds.
Evaluate Qualified Default Investment Alternatives (QDIAs)
Make sure your default investmentsāsuch as TDFsāare appropriate and well-documented.
Consider Delegating to a 3(38) or 3(21) Fiduciary
Hire professionals to help manage investments and ensure proper oversight.
Monitor Stable Value or Capital Preservation Funds
Evaluate these options for risk, fees, and alignment with participant needs.
āļø Operations & Participant Experience
Periodic Fee Disclosures (404a-5 & 408b-2)
Ensure fee disclosures to participants and plan sponsors are clear and compliant.
Deliver Effective Participant Education & Advice
Offer financial wellness tools and access to professional guidance.
Track Participant Outcomes and Retirement Readiness
Monitor key metrics like deferral rates and engagement to improve plan results.
Monitor Recordkeeper and Other Service Providers
Evaluate performance, technology capabilities, and cybersecurity practices.
Handle Participant Complaints or Errors Efficiently
Have a documented process in place to resolve issues promptly.
Conduct Annual Plan Reviews
Perform a full review of investments, operations, plan design, and service providers.
Prepare for Fiduciary Audits or Investigations
Maintain a clear paper trail to support fiduciary decisions and protect against liability.
š Cybersecurity & Data Privacy
Implement Cybersecurity Risk Management Procedures
Require providers to follow best-in-class cybersecurity protocols and have incident response plans.
Ensure Data Privacy and Protection
Restrict access to sensitive data, use secure transmissions, and monitor third-party access.
š§© Governance & Oversight
Establish a Formal Governance Structure
Clearly define fiduciary roles, responsibilities, and decision-making authority.
Conduct Regular Committee Meetings
Document meetings with agendas and minutes to support prudent governance.
Maintain a Fiduciary File
Store all key plan documentsāIPS, minutes, service agreements, and review recordsāin one place.
Provide Fiduciary Training
Ensure all plan fiduciaries understand their ERISA obligations and receive periodic training.
Evaluate Conflicts of Interest
Identify and manage any potential conflicts to prioritize the interests of participants.
š Final Thoughts
Staying compliant and acting in the best interest of participants is not a one-time taskāitās an ongoing responsibility. Implementing these fiduciary best practices will help ensure your retirement plan is well-managed, cost-effective, and aligned with participant success.
Need help evaluating your plan?
Contact us today for a fiduciary review or benchmarking report.