De-Risking Your Plan

De-Risking was on the agenda of the recent ERISA Advisory Council meeting on Employee Welfare and Pension Benefit Plans. Without adding regulations, the council agreed that it is important to mitigate risk with regard to plans. While the spirit of the discussion may be aimed at pension obligations and defined benefit plans, the principles also hold true for other types of retirement plans.

Here are four suggestions of ways that you can minimize risk for both your participants and for yourself as a responsible fiduciary:

1. Review your plan document at least annually. Make sure that the parameters are meeting your needs and that any service providers or third party administrators are following the plan. Review investment selections and the Qualified Default Investment Alternative.

2. Establish or maintain a representative retirement plan committee. A committee of plan participants who represent different interests provides perspective and spreads buy-in for decisions made regarding the plan. The committee should meet no less than quarterly, and someone needs to be appointed to take minutes at the meeting. Minutes must be available for review by all plan participants.

3. Understand and justify plan expenses. Much attention is placed on plan fees, and much is misunderstood. As a fiduciary, you minimize risk by being able to communicate and disclose expenses in a way that makes sense to participants.

4. Obtain fiduciary liability insurance. Such insurance may be a rider to general liability coverage, and is worthwhile to protect all those with fiduciary responsibilities. While you can’t be sued by a participant who loses money, you must be fully compliant with ERISA regulations.

You can contact me, Dalton Cox, if you have specific questions about your fiduciary responsibilities.