What must an ERISA Fiduciary do?

Under the Prudent Expert Rule, an ERISA Fiduciary must:

  • Act with skill and diligence of a prudent person knowledgeable in the particular action being taken
  • Carry out responsibilities solely in the interest of plan participants for the exclusive purpose of providing plan benefits and defraying reasonable expenses
  • Diversify investments to manage risk and impact of large losses
  • Act in accordance with plan documents when not consistent with ERISA

Who are ERISA Fiduciaries?

  • Plan sponsors
  • Plan administrators
  • Plan Trustees
  • Investment managers
  • Committee members
  • Investment Advisors

Plan Fees and Expenses

  • Plan fees and expenses must be reasonable.
  • Reasonableness can be determined by benchmarking against other plans with similar characteristics and features.
  • Fees should be evaluated considering which services are included.
  • Comparison among different providers' programs and ongoing due diligence help to ensure that fees and expenses continue to be reasonable.
  • Reasonable does not mean "cheapest", but the cost should be commensurate with the services added.

Qualified Default Investment Alternatives (QDIA)

  • ERISA Fiduciaries are relieved of fiduciary liability for the investment of plan assets into a Qualified Default Investment Alternative (QDIA).
  • QDIAs must be one of the following:    
    • Age-based or target date investments    
    • Balanced investments    
    • Managed accounts
  • Participants must have had reasonable opportunity to direct the investments    
    • given notice at least 30 days in advance of plan eligibility AND 30 days in advance of the first investment into a QDIA
  • Participants must:    
    • Be able to transfer out of the QDIA and into other options    
    • Always have and opt-out option

Have a Question?

Thank you!