ERISA & Fiduciaries: Know the Code

The marketing of “fiduciary warranties” has increased in recent years, in response to a wave of lawsuits against retirement plan sponsors charging breach of fiduciary duty. But the fine print found in many of these “warranty” agreements does not offer as much protection as many plan fiduciaries may believe. Plan sponsors would be better served with a thorough reading of key sections of the ERISA code, as discussed in this whitepaper.

Fiduciary duty and the limits of “warranties”

The rules pertaining to fiduciary duty as outlined in ERISA law legally obligates retirement plan sponsors to ensure investment options and service providers hired by the plan do not charge excessive fees to participants. In recent years, these excessive fees have been the subject of numerous class action lawsuits against plan sponsors for breach of fiduciary duty.

Vendors in the retirement plan marketplace have introduced fiduciary support solutions such as “warranties” promising to shield plan sponsor from lawsuits and personal liability from breach of fiduciary duty. However, the protections offered by these solutions are limited and plan sponsors remain ultimately liable for carrying out their responsibilities as plan fiduciary.

Takeaways for plan sponsors

• Plan sponsors should understand and follow the letter of the law to meet their fiduciary obligations as defined in current ERISA law.
• Plan fiduciaries should take compliance with ERISA regulations into their own hands, rather than rely on third-party fiduciary “protections” that are limited in scope.
• Plan fiduciaries must ensure all products and services provided to the plan are in the best interest of participants and that the fees for these products and services are reasonable.
• When screening product and service providers for the plan, plan sponsors should ask if the companies are fiduciaries themselves and how they will be compensated for the product or service they provide.

For a complete discussion, download our whitepaper ERISA & Fiduciaries: Know the Code.