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Home» DOL » ErisaALERT 2012-08 10 Things Fiduciaries Should Avoid

ErisaALERT 2012-08 10 Things Fiduciaries Should Avoid

Posted on April 15, 2012 by Mary Andersen in DOL

In recent court case,Tussey v. ABB, Inc., No. 2:06-CV-04305-NKL (W.D. Mo., Mar. 31, 2012), the judge found that the plan fiduciaries breached their fiduciary duties and were jointly and severally liable for $13.4 million lost by the Plan due to failure to monitor recordkeeping fees and negotiate rebates and $21.8 million lost by Plan due to mapping one investment fund to another. In addition, the service provider was held jointly and severally liable for $1.7 million for lost float income.

Lessons learned from this case are at least 10 things Plan fiduciaries should avoid:

  1. Failing to follow the terms of the plan’s governing documents
  2. Wearing your corporate hat when acting on behalf of the Plan and Plan participants
  3. Not knowing what you are paying for services to the Plan.
  4. Not benchmarking the fees you are paying
  5. Not monitoring recordkeeping costs
  6. Not following the written procedures for removing investment funds
  7. Not engaging in a deliberate process for selecting an investment fund
  8. Not choosing less expensive share classes of the same investment when available
  9. Not questioning when informed by the service provider that the plan’s recordkeeping fees subsidized corporate services as well as ignoring an independent finding that recordkeeping fees were high and appeared to subsidizing services for other corporate plans.
  10. Not communicating the subsidies with other members of the Committee.

It remains to be seen whether this case will be appealed and if the judge’s finding will hold on appeal. However, this case has received a lot of press and given §408(b)(2) and §404(a)(5) disclosure requirements it is worth a read by plan fiduciaries, especially for plans with revenue sharing arrangements.

Bottom Line: Understand and follow your plan’s governing documents. Understand the fee arrangements with your service providers and above have a well documented process for fiduciary decisions. When dealing with ERISA plan fiduciary matters, the only hat you should wear is that of acting in the best interest of participants. When in doubt, ask.

 

You may want to check our new blog periodically for quick updates on compliance issues.

Note: all links are active as of the date of issuance of this ErisaALERT.

Disclaimer: This material is for the sole purpose of providing general information and does not under any circumstances constitute legal advice and should not be used as a substitute for legal advice. You should seek the advice of counsel when applying the requirements to your plan. For more information on this ErisaALERT contact us by phone at 610-524-5351 and ask for Mary Andersen or 973-994-7539 and ask for Theresa Borzelli.

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