When my car needs work, I take it to a mechanic. If a pipe develops a leak I can’t fix, I call a plumber. By paying an expert, the responsibility is off my shoulders. I tell you, it’s a complete relief.
But with fiduciary responsibilities, even when you hire an expert—there is no such thing as complete relief. You can never entirely pass the buck. Some of the responsibility is always on your shoulders.
The law requires that fiduciaries act as prudent experts. Not just act prudently, but as a prudent expert. For example, when choosing an advisor to select an investment menu for your retirement plan or provide other plan services, you maintain the fiduciary responsibility of acting as a prudent expert in the selection of that service provider.
Here are a few other things to know about fiduciary responsibilities:
- They are extremely important, as fiduciaries are obligated under ERISA to act solely in the interests of retirement plan participants. In fact, fiduciary rules have some of the highest levels of obligation and responsibility of any U.S. laws.
- They can be extremely confusing. The DOL, SEC and IRS all have a role in regulation and enforcement, and the regulations are extremely complex.
- The penalties for failing to live up to them are harsh, including personal liability in lawsuits and even criminal prosecution.
In other words, being a fiduciary comes with a heavy burden. As a result, there is demand for fiduciary education. In fact, learning about fiduciary responsibilities, especially through our full-day fiduciary session, is one of the main reasons many people come to our conferences. It is designed to help you understand what you need to do to both properly serve your retirement plan participants and protect the interests of your organization and your personal position as a fiduciary.
You may be thinking, “a full day?” The session length is a testament to the complexity of the regulations and responsibilities. But think of the value of having speakers who are experts make your responsibilities as a fiduciary much more simple and straightforward—allowing you to be confident you are in compliance and fulfilling your obligations, rather than just hoping you are. Take a look at this plan sponsor’s fiduciary checklist.
Want to know how confusing fiduciary responsibilities can be? Many people don’t even realize they are fiduciaries. At almost every one of our conferences, we’ll have people who come up to us by the end of the program saying they didn’t know they were fiduciaries when they registered, but now they plan to come back to another of our conferences so they can further focus on their fiduciary role.
If you’re not sure if you may be a fiduciary for your plan, I’d certainly recommend you take the time to find out.
Revisions to ERISA’s Definition of Who, Exactly, Is a Fiduciary
Now the good news, I hope, is that the Department of Labor will issue a revised definition of who exactly, among various vendors of retirement plan service providers, is a fiduciary in the near future. The reason I say “I hope” is we’ve been anticipating … and anticipating … and anticipating. There have literally been years of delays. The DOL announced the most recent delay from an anticipated date of August of this year to the start of 2015. But based on recent history, I wouldn’t be surprised to see still more delay.
I’m hoping the new rules bring clarity so plan sponsors know if their advisors are fiduciaries, what they are responsible for, and what they can do and what they shouldn’t do.
The Smell Test
Even amidst the current confusion, it’s crucial to know the current rules and responsibilities, and to live by them. Always remember this governing principle of a fiduciary: all fiduciary activities must be done for the exclusive benefit of the plan participants.
It’s also critical to realize that there are many things that aren’t spelled out specifically in the regulations that can still get you in trouble. So I always recommend people use the “smell test:” if an action doesn’t smell right, you shouldn’t be doing it—or at least seek professional help to find out whether it’s okay.
One action that certainly passes the smell test is attending a program such as our upcoming Las Vegas Mid-Sized Retirement and Healthcare Plan Management Conference, along with our dedicated fiduciary session. It won’t relieve you of your fiduciary responsibilities, but it will absolutely help you understand what those duties are. Knowing what to do, I promise you, is quite a relief.