BEST PRACTICES: Defined Contribution Plan Fiduciary Responsibility Flashcards
Sponsoring entities should provide a clear and well-documented governance structure to guide plan administrators.
What types of fiduciary duties do administrators of DC plans have?
Duty of loyalty, duty of care, and duty of prudence.
What does the duty of loyalty entail for DC plan fiduciaries?
Acting for the exclusive benefit of plan participants and beneficiaries, putting their interests above their own or any third party’s.
What is the duty of care in the context of DC plan administration?
Administering the plan efficiently and properly, ensuring compliance and the ongoing appropriateness of investment options.
How should a fiduciary act under the duty of prudence?
As a reasonable or prudent person would in a similar situation, exercising power or discretion responsibly.
What does the Government Finance Officers Association recommend for sponsoring entities of DC plans?
Providing a clear and well-documented governance structure to guide plan administrators.
What should fiduciaries do to avoid legal issues regarding variations between the substantive plan and official plan documents?
Document the decision-making process, keep plan documents current, and formally incorporate administrative actions and interpretations.
How often should plan sponsors communicate with service providers to identify plan objectives and goals?
No less than annually.
What should fiduciaries provide participants to make them aware of their rights and responsibilities?
A summary plan description, information, investment advice, and education.
What policies should be reviewed at least every three years and updated as needed?
Policies including current plan documents, administrative interpretations and decisions, governance, administration, compliance, and financial reporting.
What procedures should be implemented to control administrative and investment costs of a DC plan?
Understanding all plan costs, periodically reviewing contracted services for reasonable pricing, and developing comprehensive procedures for evaluating investment options.
