As a fiduciary, what responsibilities do you have and to what standard will you be held in choosing a plan administrator and making other plan decisions?
ERISA requires that a plan fiduciary discharge his/her duties with respect to an employee benefit plan solely in the interest of the plan's participants and beneficiaries. In the discharge of those duties, the fiduciary must act:
(a) For the exclusive purpose of providing benefits to participants and beneficiaries and defraying the reasonable expenses of administering the plan;
(b) with the care, skill, prudence, and diligence, under the circumstances then prevailing, that a prudent man acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and like aims;
(c) by diversifying the investments of the plan to minimize the risk of large losses, unless, under the particular circumstances, it is clearly not prudent to do so;
(d) in accordance with the documents and instruments governing the plan to the extent that those documents and instruments are consistent with the provisions of ERISA;
(e) and in compliance with court orders.
The requirement that the fiduciary act “with the care, skill, prudence, and diligence, … that a prudent man acting in like capacity and familiar with such matters would use” is often referred to as the “Prudent Expert” rule. As a plan fiduciary you are expected to act with the skill and diligence of one familiar with these matters. In its publication Meeting Your Fiduciary Responsibilities the Department of Labor (DOL) has stated that failure to do so would result in your being “personally liable to restore any losses to the plan.”
Under the Department of Labor, the Employee Benefits Security Administration (EBSA) protects the integrity of pensions, health plans and other employee benefits for more than 250 million people.