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10 Questions to Ask Yourself About Your Retirement Plan - Part 2

To continue from our previous installment, understanding fiduciary responsibilities is important for the security of a retirement plan and compliance with the law. If you answer “no” to any of the following questions, you may not be complying with federal regulations.

6. Are you prepared to monitor your plan’s service providers?

  • You should create and follow a review process at predetermined intervals to evaluate whether the current service provider is meeting your plan’s needs.

  • This review should take into consideration the provider’s performance, reports, notices, fees, questions and follow-up.

  • The review should include asking the plan’s service providers about policies and practices, ensuring that plan records are properly maintained and following up on participant complaints.

  • The review process should be documented, and when using an internal administrative committee, you should educate committee members on their roles and responsibilities.

7. Have you identified parties-in-interest to the plan and taken steps to monitor transactions        with them?

  • Parties-in-interest to the plan may include:

    • Plan fiduciaries, legal counsel or employees;

    • Individuals who are providing services to the plan;

    • Employers with employees who are covered by the plan;

    • Organizations with members who are covered by the plan (such as a union or employee organization);

  • relatives of any of individuals who are considered parties-in-interest;

    • owners of 50 percent or more of:

      • Combined voting power of a corporation;

      • Capital or profits interest of a partnership;

      • Beneficial interest of a trust or unincorporated enterprise which is an employer with employees who are covered by the plan or an organization with members who are covered by the plan;

      • Employees, officers, directors or 10 percent or more shareholders of individuals who are considered parties-of-interest.

  • Some prohibited transactions include:

      • Sales, exchanges or leases between the plan and a party-in-interest;

      • The lending of money or other credit between the plan and a party-in interest; and

      • The furnishing of goods, services or facilities between the plan and a party-in-interest.

8. Are you aware of the major exemptions under ERISA that permit transactions with parties-in-interest, especially those key for plan operations (such as hiring service providers and making plan loans to participants)?

  • One exemption allows the provision of investment advice to participants who direct the investments in their accounts. This applies to the buying, selling or holding of an investment related to the advice, as well as to the receipt of related fees and other compensation by a fiduciary adviser.

  • Many other exemptions may be applicable, depending on the situation—exemptions that apply to classes of plans and to individual plans can be viewed at in the “Compliance Assistance” section.

9. Have you reviewed your plan document in light of current plan operations and made necessary updates? After amending the plan, have you provided participants with an updated SPD or SMM? 

  • Review your plan document on a regular basis to ensure accuracy.

  • A Summary Plan Description (SPD) explains the plan simply while still providing all of the necessary information on plan features and what to expect—it is provided within 90 days of when coverage begins and is redistributed every five years or within 30 days of a request.

  • A Summary of Material Modification (SMM) informs participants of material changes to the plan or to what is included in the SPD—it is provided within 210 days after the end of the plan year, unless it represents a reduction in covered services or benefits, in which it is provided within 60 days of the change.

10. Do those individuals handling plan funds or other plan property have a fidelity bond?

  • ERISA requires that individuals who handle plan funds have fidelity bonds.

  • The fidelity bonds can be narrow, moderate or broad.

  • The required limit of liability for an individual’s fidelity bond must equal 10 percent of the plan funds handled, with a minimum of $1,000 and a maximum of $500,000 in most cases.

 If you have any questions about this article, or would like to begin talking to a dedicated retirement plan advisor, please get in touch by calling  (800) 388-1963 or via e-mail at

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