Quarterly Plans: Fiduciary Checklists in Smaller Bites

As we’ve discussed before, new litigation trends may suggest that a more active review and approach to administrative planning may manage risk as to allegations of failure to meet diligence requirements.

Plan sponsors and paperwork go together like fire and kindling: the right balance ensures an effective and predictable source of energy; too much or too little kindling can cause serious problems.

Many Plan Sponsors balance their administrative concerns by approaching their various fiduciary and administrative responsibilities via checklists and project plans. Yet even these planning tools may fall short. A quick search of “year-end” checklists for plan sponsors turns up tens of suggestions for plan sponsors. Most of those approaches fail to address both administrative and analytical issues. A quarter by quarter approach may help create the right balance.

Many experts recommend reviewing your 401(k) plan documents as well as performance at the end of the year. “…as a plan sponsor, it's important to review your 401(k) plan, ensuring that your current plan is still working for you and your employees. For example, you'll need to remind employees about their retirement benefits, collect your records, and review what's working and what could be tweaked.”[1] Yet, as we’ve discussed before, new litigation trends may suggest that a more active review and approach to administrative planning may manage risk as to allegations of failure to meet diligence requirements.[2]

Some experts can help identify key dates to monitor during a fiscal year, or priorities for plan sponsors to keep top of mind throughout the year. For example, the CFA Advisor, a global association of investment professionals, notes that the changes in the recordkeeper industry may warrant attention. “The recordkeeper industry is rapidly consolidating while struggling to keep up with a highly active regulatory environment. While some recordkeepers are meeting the challenge, others are falling behind. As part of their fiduciary duty, plan sponsors must regularly evaluate providers….”[3] Others note that plan sponsors should review their liability insurance on a yearly basis, especially with changes in litigation changing risk levels. “While an ERISA bond is required, it only protects plan assets. It does not protect plan fiduciaries from litigation. It’s recommended that a retirement plan with participants purchase fiduciary liability insurance to protect it and the individuals serving as trustees.”[4]

Other experts provide a detailed, month by month discussion of administrative tasks to be completed each month of the quarter.[5] But some of those detailed instructions, even though they are dated 2023, are out of step with key changes in auto-enrollment and recordkeeping. For example, a suggestion that a sponsor “[v]erify that employees who became eligible for the plan between October 1 and December 31 received and returned an enrollment form. Follow up on forms that were not returned” misses that many employers, even smaller firms, use online onboarding. For them, 401(k) enrollment is a task that rolls along with opting for health care benefits and verifying accounts for direct deposit.

Many plan sponsors may want to consider incorporating suggestions from benefits vendors and law firms concerning checklists into their own quarter by quarter plan. In fact, employee benefits attorney  David Klimaszewski recommends that sponsors create a checklist for quarterly meetings. “Given that there are  so many considerations to weigh when overseeing a retirement plan, it is important for plan sponsors to have a checklist for their committees—whether the sponsor has a single retirement plan committee or dual investment and administrative committees—to cover in quarterly meetings.”[6] He suggests a quarter by quarter plan to include administrative details, such as participation and performance audits of plans and reviewing any changes to balances, including loans and withdrawals. And, plan sponsors may want to consider tackling specific issues, such as those noted above on insurance coverage review and recordkeeping vendor audits on a quarter by quarter approach. Plan sponsors may want to consider using software to assist in creating and refining these checklists, such as Monday.com, Checkify, or CheckFlow.

[1] https://www.guideline.com/blog/an-end-of-year-checkup-8-tips-for-401-k-plan-sponsors

[2] https://www.bcgbenefits.com/blog/keeping-records-on-your-recordkeeping-fees

[3] https://blogs.cfainstitute.org/investor/2024/02/08/plan-sponsor-priorities-for-2024-a-seven-item-checklist

[4] https://www.rbpsinc.com/the-ultimate-plan-sponsor-checklist

[5] https://pensionmark.com/plan-sponsor/plan-sponsors-quarterly-calendar-q4-2023

[6] https://culhane.law/klimaszewski-plansponsor-checklist-for-retirement-plans

These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.

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