(Forbes) -- Does your 401(k) plan have a fiduciary?
Yes. Every 401(k) plan has at least one fiduciary.
Plans are legally required to have at least one fiduciary. Employers often appoint committees of officers and managers to act as the fiduciaries.
What does a 401(k) fiduciary do?
A fiduciary is responsible for running the plan.
The person, or group of people, who make decisions about plans and their investments are fiduciaries.
They must act prudently and in the best interest of the employees.
Prudence means that they have to make decisions carefully and thoughtfully.
How can I find out about the fiduciaries in my 401(k) plan?
It’s in the plan’s Summary Plan Description or SPD. Each employee who is eligible to be in the plan should have been given a copy of the SPD.
But, if you can’t find it, just ask the benefits people at your company.
They will give you a copy or they may point you to the plan’s website to get a copy.
If, after reading the SPD, you have any questions about how the plan works or who the fiduciaries are, ask the benefits people at your company.
Why does this matter?
Explained in a general way, it matters because those are the people who have to operate the plan properly and look out for the employees’ best interests.
More specifically, the fiduciaries are responsible for decisions such as:
Making sure that the plan investments are well-managed and reasonably priced. The officers and managers who act as fiduciaries must also monitor the investments, which means that they need to look at them periodically to make sure that they continue to be well-managed and reasonably priced.
Selecting the service providers for the 401(k) plan. The most common service provider for a 401(k) plan is called a “recordkeeper.”
The recordkeeper usually provides the plan website, educational materials, information about the investments, executes the investment transactions, maintains accounting records for participant accounts, and so on. In many ways, the recordkeeper is the heart-and-soul of the operation of the plan. So, it’s important that the fiduciaries hire a recordkeeper that can properly do those jobs.
Also, the fiduciaries must make sure that the recordkeeper costs are reasonable.
As with investments, plan fiduciaries must regularly monitor or oversee, the recordkeeper to make sure that its services continue to be of good quality and reasonably priced.
Fiduciaries have more than those two sets of duties. But, that’s a good starting point. The law that governs the fiduciaries, known as ERISA, is demanding. If the fiduciaries don’t act competently and knowledgeably, they can be sued for breach of their duties . . . and they sometimes are.
One last question, “What should you do with this information?” First, if you are a company officer with responsibility for making decisions (for example, a committee member), you should ask for fiduciary training. Plan consultants, investment advisers, and ERISA attorneys commonly provide that education to committee members. Without some formal education, it’s difficult for plan committees to understand the full range of their responsibilities or how to satisfy those duties.
If you are a participant in the plan, you should know that the plan’s services, investments and costs are being monitored, or reviewed, on a regular basis by the plan fiduciaries. If you think there might be a problem, contact your company’s benefits staff and ask them about it. If the answers aren’t satisfactory, ask them to tell the committee about your concerns. Most plan committees take their jobs seriously and want the plan to work well.