Developing a Fiduciary Training Program

By John Ortman • October 27, 2014 • 0 Comments

Despite lacking any regulatory authority to do so, the Department of Labor has made an issue of fiduciary training over the last few years. The reason, according to Bryan Cave's Sheldon H. Smith: The DOL views fiduciary training as a critical element of good governance, and looks for evidence of a fiduciary training program upon audit.

Speaking at ASPPA's 2014 Annual Conference Oct. 27, Smith noted that more employers are following the DOL's lead and providing formal fiduciary training to their plan committee members. All members should have a full understanding of what it means to be an ERISA fiduciary -- as well as the exposure to liability associated with their fiduciary status, Smith asserted.

Smith described the fiduciary training approach he has adopted with his plan sponsor clients. His program consists of four training modules intended to be presented at four consecutive quarterly meetings of the administrative/investment committee meetings. He tries to limit each module to 30 minutes for experienced committee members; new members receive more extensive training.

Smith outlined a possible agenda for each of the four training sessions:

Module 1

  • Identify committee members' status as a fiduciary and the various types of fiduciary functions.
  • Distinguish fiduciary functions from settlor functions.
  • Review the primary statutory duties of a fiduciary.
Module 2
Cover the basics areas of knowledge required to serve as a fiduciary, and ensure that their grasp of those basics is up to date, regarding:
  • prodedural prudence;
  • delegation;
  • preparation for and execution of committee meetings;
  • attorney-client privilege; 
  • conflicts of interest; and
  • the pertinent requirement of ERISA and the Code.
Module 3
    • Committee charter and membership.
  • EBSA and IRS examiniations and audits.
  • Internal controls.
  • Outsourcing administrative services.
  • Document review.
  • Procedures for handling uncashed checks. 
  • TDFs and related duties.
  • Re-enrollment procedures for auto-enrollment arrangements.
Module 4
Financial matters, including:
  • fees and risks;
  • ERISA investment theory;
  • behavioral finance;
  • revenue sharing;
  • ERISA budget accounts;
  • brokerage windows; and 
  • watch list.
Fiduciary liability and protection, including:
  • personal and co-fiduciary liability;
  • bonds, indemnification and insurance;
  • good governance procedures and documentation;
  • good advisors; and
  • safe harbors.
Fiduciary education is part of a cycle with good governance, Smith said: "Good governance includes fiduciary education, and fiduciary education leads to good governance."