"...fiduciaries need to deliberate and make considered decisions. And the best way to prove such deliberation is documentation of the decision making process."

What is a 401(k) Fiduciary to Do?

September 1, 2014

Admit it: Your company, as a 401(k) sponsor, and the company decision makers who direct plan operations (including in-house trustees), are ERISA fiduciaries. Don’t quibble about this but take a step back and figure out what to do about it.


You’ve read about investment advisors who can assist in performing investment duties and fiduciary insurance for claim protection. (This insurance should not be confused with the required ERISA fidelity bond that protects the plan, not the fiduciaries). Those options may make sense for you, and may not. But, whether or not you use an investment advisor or purchase fiduciary insurance, there are other, more basic steps to take.

Bear in mind that retirement plan fiduciaries do not have to make perfect decisions. For example, they don’t necessarily have to select the cheapest mutual funds in the market for their plan’s investment array. But they do need to deliberate on their investment decisions and perform periodic reviews of investment results.

This is necessary because cases which question fiduciary investment decisions frequently turn on the nature of the process followed by plan fiduciaries rather than the substance of the resulting decision. In other words, a “correct” investment decision reached in a flawed decision making process is still subject to question.

So, fiduciaries need to deliberate and make considered decisions. And the best way to prove such deliberation is documentation of the decision making process. Such documentation can take the form of meeting minutes, memos or committee resolutions. There are no hard and fast rules on how to do this. The bottom line is that any reasonable written record of how and why the fiduciaries made their decision will work to protect them from breach of duty claims.


Also consider the Section 408(b)(2) fee disclosure rules that have been in effect since August 2012. The specific matters that plan fiduciaries must consider have been expanded by the new fee disclosure rules. “Responsible plan fiduciaries” have to evaluate each provider’s fee disclosure statement to determine:

  • Have all covered plan service providers submitted fee disclosure documents?
  • Are provider fees reasonable?
  • Does the provider’s fee disclosure document meet all of the requirements of the fee disclosure rules?
  • Have plan fiduciaries made a written record of their evaluation of the provider fee disclosures?
  • Do your plan fiduciaries meet regularly to review the plan’s investment performance and provider’s fees?

A “no” answer to any of these questions is a red flag.

Need help with any of this? Plan service providers can provide invaluable assistance. Third party administrators (TPAs) can help benchmark provider fees so fiduciaries have some guidelines on “reasonable” fees. Investment advisors can assist in selecting investments for the plan and in monitoring investment results. And they can help with documentation of fiduciary decisions. But the ultimate responsibility for these matters likely falls on the shoulders of your in-house fiduciaries.


You may have seen commentary on recent court decisions and settlements that involve multi-million dollar recoveries against retirement plans and their fiduciaries. These court decisions get the headlines but some less publicized decisions provide helpful guidelines as well.

Consider the U.S. Supreme Court case that can help control plan liabilities and related fiduciary exposure. The Supreme Court’s 2013 decision in Heimeshoff v. Hartford Life & Accident Insurance Co. demonstrates the effectiveness of the most important provision that probably is not in your plan.

Heimeshoff upheld the validity under ERISA of a plan provision which required any suit to recover plan benefits to be filed within a three (3) year period after a proof of loss is due under Wal-Mart’s insured disability plan. So, even a valid benefit claim by a plan participant cannot be pursued in court after the expiration of a claim limitation period provided in the plan document. (That’s if the period is reasonable in length and there is no controlling statute to the contrary).

For states like Illinois, which provides a “borrowed” ten (10) year statute of limitations for ERISA suits to collect benefits, the imposition of a two or three year limitation period through the plan document can provide considerable additional protection.

The bottom line is that there is no downside to this kind of provision. It should be in your 401(k) plan document, summary plan description, and benefit distribution forms. It should be there now.


Fiduciaries need to deal with expanded liabilities from the changing regulatory and judicial landscape. Employers, plan administrators, HR staff and plan service providers should make sure that plan fiduciaries meet regularly to discuss plan business and document their deliberations. If you have any concerns about the prior conduct of plan fiduciaries, make sure you consult top notch plan service providers – and keep their advice confidential by dealing through independent legal counsel and not your company’s regular corporate or benefits lawyer.

To discuss these issues or others related to your family business, contact: Andrew Williams, (312)696-1373,

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