Fiduciary Planning: A Checklist


Fiduciary Planning: A Checklist

By: Kelly McGrath


Understanding your role as a Fiduciary on your 401k Plan

We are an advocate for our clients providing clear and comprehensive advice, emphasizing plan education, risk mitigation and plan growth in order to meet our clients’ long-term objectives. We understand that business owners are busy running their companies and not in the business of running a retirement plan. The Department of Labor has come down hard on retirement plans with new rules and regulations, putting more liability on the business owners and plan sponsors. Our goal is to not only create a healthy retirement plan for employees, but to also protect our plan sponsors from unnecessary risk and liability by offering a comprehensive fiduciary outsourcing solution.


What you need to know as a Fiduciary

  • Consider if your duties cause you to exercise discretion over plan assets or administration (hiring service providers, making investment choices, spending plan assets, etc.). If so, you are a fiduciary and need to make sure you understand and comply with your duties.

  • Consider establishing procedures for delegating fiduciary authority, including consideration of whether you should make a written delegation clearly identifying the scope of delegated authority; for example, using a third party.

  • Provide fiduciary education for new fiduciaries as well as continuing education for all fiduciaries.


Basic Fiduciary Duties

  • Keep records of meetings and decisions so that you can demonstrate your compliance with a prudent process.

  • Develop written procedures for routine fiduciary decisions. For example, do you have a process for making investment decisions or hiring service providers?

  • Consider asking plan counsel to make sure you are complying with any prohibited transaction exemptions that might be necessary.

  • Act in accordance with the documents and instruments governing the plan.


Overseeing Investments

  • Find out who is responsible for directing investments in your plan.

  • Consider setting up a formal investment committee if you don’t already have one.

  • Consider developing an investment policy statement documenting all of the plan requirements and processes.

  • Review company stock options (if any) for compliance and consider engaging an independent fiduciary to help monitor the appropriateness of company stock as an investment option.


Consider engaging an independent fiduciary to help monitor the appropriateness of all investment options. We encourage our plan sponsors to hire a 3(38) Fiduciary that takes over this role and take discretion on the fund lineup. They are incentivized to keep expenses down and to have better performing funds.


Overseeing Service Providers

  • Conduct a periodic review of service providers to ensure that service and performance standards are being met.

  • Document the review/meetings and issues discussed as well as any decisions made during, or as a result of, the review/meetings.

  • Familiarize yourself with the requirements of Section 408(b)(2).

  • Review the fees (direct and indirect) of service providers to assess the reasonableness of fees and whether any conflicts exist.

  • Conduct an in-depth review of service providers periodically to ensure that your fees and arrangements are consistent with current practices and costs and to determine whether a new request for proposal process is warranted.


We conduct a plan benchmark annually to make sure our fees, as well as our providers’ fees, are in line with the size of your plan.


Helping Participants

  • Talk to your service providers about providing required participant disclosures.

  • Provide ongoing communications on investments and plan features (e.g., loans, distributions, or contributions).

  • Make sure all communications are accurate.

  • Distribute information to all eligible employees regarding the investment options available under the plan.


Consider conducting educational meetings and providing general financial/investment information. Consider using automatic enrollment with a qualified default investment alternative (QDIA). We provide regular education meetings that do not only talk about the 401k plan, but also relevant topics that further educate participants.


Plan Administrator Basics

  • Develop a compliance plan or calendar to keep track of the various deadlines throughout the plan year.

  • Periodically review the plan documents to ensure that they reflect current practices and have been updated for legal and regulatory changes.

  • Complete and file all required government reporting, such as the Form 5500.

  • Comply with the applicable Internal Revenue Code nondiscrimination tests.

  • Review the process for achieving the following in a timely manner:

    • Collecting employee contributions and loan repayments

    • Forwarding contributions and loan repayments to the service provider

    • Investing the contributions and loan repayments.


The administration of the 401k plan can be outsourced to a 3(16) Fiduciary which takes on the role as plan administrator, including signing the 5500, tracking eligibility, approving loans, payroll submissions and overall keeping the plan compliant from an administrative standpoint.


Fiduciary Liability / DOL Audit

  • Maintain a well-documented, prudent fiduciary process for decision-making.

  • Consider including documentation showing that decisions were actually made.

  • Consider obtaining liability insurance that protects plan fiduciaries from the costs associated with litigation (including unfavorable judgments).

  • Designate a point person (often an in-house or outside attorney) to coordinate and work with the Department of Labor (DOL) in the event of an investigation.


This sounds like a lot….

If the administration of your 401k plan feels overwhelming and the fiduciary responsibility is too daunting, IBTX and IronOak Partners can bring you an enterprise of Wealth Management solutions, helping you mitigate risk as well as outsource the administration so you can spend your time and resources running your business, not running a 401k plan.