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Wednesday, January 23, 2013

This recent post on the Plan Sponsor Council of America’s website states that the Department of Labor has recently requested evidence of fiduciary training as part of its audits. While there is no express ERISA requirement that fiduciaries be trained, the DoL seems to take the view that training is evidence of a fiduciary properly exercising his or her duty of prudence.  (It also happens to be one of our New Year’s Resolutions for fiduciaries too.)

The first step is deciding whom to include.  Basically, a fiduciary is (1) anyone with discretionary authority over the management or administration of an ERISA plan, (2) anyone with discretionary authority over the management or disposition of its assets, or (3) anyone who provides investment advice for a fee.  (Individuals in category (3) should have their own training already.)  Fiduciaries of the plan include the trustee, the plan administrator, the person responsible for reviewing claims or appeals, and any designated administrative committees.

When scheduling a training session, you should ensure that all the relevant individuals are included.  For example, if you have a plan committee that meets regularly, all of its members should be trained.  If there is a separate investment committee, those individuals should also be trained.  (If you do not have a designated plan or investment committee, you should consider one or both to help establish clearer lines on who has fiduciary responsibility and liability.)  Whether or not you have a committee (but especially if you do not), you should identify which individuals have responsibility for the plan administration and have them trained as well.

In addition, you should consider whether any board of directors members or members of management who have authority to appoint fiduciaries should be trained on their limited duty of oversight of their appointees.  This will help them understand the nature of their role and responsibilities as delegating fiduciaries.

A common mistake some plan sponsors make is to assume that the third party administrator they have hired is the “plan administrator.”  In fact, that is almost always not the case.  Most TPAs specifically state in their service contracts that they are not fiduciaries, and in particular, place the ERISA title of plan administrator on the company.  The bottom line is that if you’re a plan sponsor and you don’t think anyone in your workforce is a fiduciary, you’re mistaken.

In our experience, the initial fiduciary training usually takes a couple of hours or so to make sure that all the bases are covered and there is sufficient time for questions.  Depending on the scope and types of plans involved, it may take longer.  Periodic updates can be shorter if the fiduciaries have been trained recently.

Based on the information in the PSCA post, it appears the DoL expects training to occur at least annually.  Newly hired individuals, or individuals who assume fiduciary roles for the first time, should also be trained promptly.  While annual training is probably a “platinum” best practice, for many plan sponsors, that can be difficult both in terms of scheduling and cost.  However, the key is to make sure it is done, done well, and done with some regularity to keep everyone up to date.

Have you done your fiduciary training?  If not, what are you waiting for?

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