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5 Key Qualities Of An Effective 401k Plan Fiduciary

Some key responsibilities of a fiduciary are to ensure that plans are organized, adequately implemented, and continuously monitored.

Fiduciaries are required, by ERISA regulations, to act prudently, carefully, skillfully, and diligently with regard to plan goals and objectives. For example, it is necessary for a fiduciary to diversify investments and identify factors including investment horizon, expected returns, and overall applicable level of risk.

Being in a position of increased liability, a fiduciary is accountable for the transactions made on behalf of the plan and therefore must avoid all conflicts of interest. If a fiduciary fails to adhere to ERISA and changing laws or regulations, he or she is personally liable to restore all losses that result from compliance failure.

  • Recognize and disclose basic fiduciary responsibilities
  • Develop a thorough Investment Policy Statement (IPS)
  • Maintain comprehensive plan options
  • Make prudent option selections
  • Maintain investment diversification
  • Exercise ongoing due diligence and monitoring
  • Uphold the interest of the plan participants
  • Inform participants about plan progress and details
  • Set minimal standards and methods of communication
  • Seek to maximize the value of communication
  • Identify apparent communication problems, if any
  • Identify source of fees for the use of any external services
  • Evaluate and track fund manager performance
  • Maintain communication with record keepers and third party administrators
  • Report to government agencies
  • Uncover potential errors through annual self-audits
  • Seek to avoid the mistakes uncovered during audits
  • Understand the penalties for non-compliance

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