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Reduce the Risk of Fiduciary Errors

Fiduciary Rules and Practices

Running and maintaining a plan can be complicated — and fiduciary rules are part of the reason. A recent blog entry offers some suggestions regarding how to reduce the risk of making fiduciary errors in operating a plan.

“Operational errors can arouse the same severe consequences as an investment program that’s infested with excessive investment-related fees,” warns the Roland Criss law firm in “Fiduciary Fallout Gets Personal for Human Resources VP,” adding for good measure that the Department of Labor “consistently reminds the HR community that violations of an ERISA plan’s operational rules can expose enterprise leaders to personal economic damages.”

To reduce the risk of running afoul of such errors, Roland Criss suggests the following.

Study the Plan Document. ERISA requires qualified plans to have a written plan document, which Roland Criss calls “a guide for the plan sponsor and its responsible managers for executing their responsibilities.” It also notes that the document is supposed to define the benefits the plan offers, how they are funded, who the responsible plan fiduciary is, how the plan can be amended, how duties are delegated and the rules by which the performance of operations executives’ performance is evaluated.

Monitor all Activities. Roland Criss suggests closely watching all activities that support plan benefits in order to make sure that the plan document is being followed. “ERISA plan administration cannot be operated on ‘autopilot,” they write.

Watch Payroll. One of the areas that is particularly rife with errors and the consequent penalties, says Roland Criss, is payroll and contribution file submissions.

Commission a Risk Assessment. Periodic assessments of operations risks, conducted by a qualified consultant can help identify potential hazards and examine the consequences of mistakes. “A risk can’t be neutralized if its presence isn’t known,” the blog post argues.

Consider Automating Operations Control. Automation of operational practices “can reduce costs dramatically and remove the guesswork about complying with the plan document,” Roland Criss says, and notes that there are new tools by which operational mistakes can be detected.