With the new Department of Labor fiduciary rules further pushed back to go into effect on January 1, 2019, plan fiduciaries have more time to review employee benefit plan best practices. Employee benefit plan best practices include a review of who is involved in what role, the plan administrator's responsibilities, and fiduciary duties under ERISA.
Most private employee benefit plans, including retirement and health plans, are subject to the Employee Retirement Income Security Act of 1974 (ERISA). Under ERISA, there is a fiduciary duty for those who manage or control plan assets. This includes plan sponsors, administrators, and trustees.
The plan should identify the plan sponsors, trustees, and administrators, as well as spell out the administrator's duties. Plan administrators are those responsible for administering the benefits plan as a fiduciary. This fiduciary duty requires them to act solely in the interest of plan participants and beneficiaries.
The plan administrator, as an individual or committee, has a number of responsibilities. This includes:
- Complying with ERISA requirements and federal law;
- Managing the plan according to plan documents;
- Following reporting and disclosure requirements;
- Establishing administrative investment policies;
- Maintaining plan and participant records;
- Reviewing benefit claims;
- Selecting plan investments; and
- Administering the day-to-day operations of the plan.
Fiduciary responsibilities for an ERISA benefits plan may include limiting expenses to reasonable and necessary costs of administering the plan, diversifying investments, following the terms of the plan, avoiding conflicts of interest, monitoring investment performance, and selecting investment options and providers.
Failure to follow benefit plan best practices may leave a fiduciary personally liable for losses to the plan and result in removal from their duties. Plan administrators should take care to reduce their potential liability for fiduciary breaches. Best practices include:
- Documenting the administrator's decision-making process to show the basis for making decisions on behalf of the plan.
- Selecting qualified individuals for any fiduciary committee, with clearly designated areas of responsibility.
- Regular monitoring and adjustment of investment selections based on the plan goals. As investment performance or costs change, adding or removing investments as necessary.
- Keeping an eye on costs. Plan expenses must be reasonable and avoid the appearance that there is a conflict of interest. This may mean removing certain investments as costs or fees increase.
- Carefully review any changes to the plan documents. Any changes must comply with ERISA requirements, including communication and notice requirements. Plan compliance includes making sure investments and administration comply with plan documents as well as state and federal regulatory requirements.
- Communicate with employees and plan participants about plan eligibility and enrollment deadlines. Automatic enrollment and providing participant access to select investments can increase participation and give plan participants a role in their benefits.
If you have any questions about employee benefit plan best practices and ERISA compliance, Butterfield Schechter LLP is here to help. We are San Diego County's largest firm focusing its law practice on employee benefits. Contact our office today with any questions on how we can help you and your business succeed.