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7 Ways to Mitigate Retirement Plan Fiduciary Liabilities

1. Document all decisions— Appoint a secretary to take notes on all actions and decisions.


2. Hold retirement plan committee meetings regularly—Quarterly is the best practice; make sure your people get there and have a good attendance record.



3. Appoint qualified committee members—If you want to bring in people from different departments within the hospital to have them more involved in the retirement plan process, be sure that people are chosen who understand how the retirement plan and investments work. You also need to have an odd number of people on the committee to avoid votes that end in a tie.



4. Periodically review plan operations and providers—Review the scope of services in the service agreements with all plan providers to ensure these services are still needed and are of high quality. Make sure the plan administrator and service providers are administering the plan in accordance with the plan document.


5. Ensure ERISA compliance—ERISA Sec. 404(c) protects plan sponsors from a suit by plan participants for individual investment loss. If an individual loses money in the plan that is compliant with ERISA Sec. 404(c), the plan sponsor would not be held liable. There are criteria that the plan sponsor must meet, including delivery of prospectus anytime an individual enters a new fund. To be eligible for electronic delivery, U.S. Department of Labor states that the individual must have a computer at his or her desk as part of normal business activities—most employees at hospitals do not.

6. QDIA—QDIA is an acronym for Qualified Default Investment Alternative. It is a plan default for participants who do not make an investment decision in a qualified pension plan. The default accounts include professionally managed accounts, balanced mutual funds, and lifecycle mutual funds. Stable value accounts or fixed accounts do not qualify as a QDIA, with few exceptions. Plan sponsors should understand, and the plan should adhere to, the QDIA requirements to qualify for safe harbor protection.

7. Utilize fiduciary liability insurance—
Fiduciary liability insurance is highly recommended and generally not expensive. Review the plan sponsor’s Director’s and Officer’s insurance liability to ascertain if the plan fiduciaries are covered for fiduciary actions. Specific fiduciary coverage is available as a rider to general liability coverage from many insurance carriers. This is not to be confused with the ERISA bond requirements.

Note: The general counsel’s job is to mitigate and manage legal risk. He or she should be a partner in the retirement plan oversight process.

If you have any questions about fiduciary responsibilities, or would like to begin talking to a retirement plan advisor, please get in touch by calling (800) 388-1963 or e-mail us at hbs@hanys.org.


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