29 April 2017

Fiduciary Checklist

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Fiduciary Checklist

The following are areas of review that retirement plan fiduciaries may want to consider in fulfilling their fiduciary responsibilities. Plan sponsors and plan officials are encouraged to consult their ERISA attorneys, service providers, advisors, or consultants for additional guidance and information. 



With assistance from your ERISA counsel, determine the identity of all plan fiduciaries and ensure that they are aware of and understand their fiduciary responsibilities.1

Provide fiduciary education for new fiduciaries as well as continuing education for all fiduciaries.2

Identify in the plan or trust agreement or written investment policy statement (as appropriate) the specific roles of each fiduciary, including areas of responsibility and oversight.


Adopt an Investment Policy Statement.
Consider the adoption of a written investment policy statement (IPS), 3 which evaluates the specific needs of the plan and its participants and defines the following:

• The identity of each fiduciary and service provider to the plan, including the investment committee, investment consultant, investment custodian/trustee, and investment manager (for separate accounts, not applicable for mutual funds);
• Investment objectives and goals;
• Classes of investments authorized;
• Styles of investments authorized;
• Criteria for reviewing/selecting investment options and investment manager performance, including periodic performance against an appropriate index and peer group, as well as IPS objectives;
• Criteria for reviewing fees for investment management and other plan services and the reasonableness of such fees in light of services provided;
• Restrictions on investments;
• Standards for reviewing use of directed brokerage arrangement;
• Proxy voting procedures; and
• Reporting standards applicable to investment managers and other advisors.

If an IPS has been adopted, make sure that all the terms of the policy (e.g., scheduled meetings, investment lineup reviews, etc.) are being complied with by appropriate fiduciaries.

Review Investment Options
Review the plan’s investments at least annually and, to the extent applicable, in accordance with the requirements of the plan’s written investment policy statement.

• Potential due diligence criteria for reviewing/selecting investment options include the following:

• Performance relative to peers;
• Performance relative to assumed risk;
• Inception date of product;
• Correlation to specified peer group;
• Total assets in the product;
• Holdings consistent with style;
• Expense ratios or fees; and
• Stability of organization.
• If the plan holds insurance contracts, review the creditworthiness of contract issuers; and
• If the plan holds company stock, evaluate the appropriateness of maintaining company stock in the plan in accordance with preestablished procedures (see below).

Conclude that the plan maintains a broad, well-diversified investment lineup that covers the risk/return spectrum and any applicable requirements of the plan’s written investment policy.

If the plan is intended to comply with ERISA Section 404(c), ensure that the investment lineup includes investment options that give participants a reasonable opportunity to:

• materially affect both the potential return and degree of risk relating to their accounts;
• choose from at least three “core” investment alternatives — each of which is diversified and satisfies certain other requirements; and
• diversify their investments to minimize the risk of large losses.

If the plan intends to receive fiduciary protection for default investments under ERISA Section 404(c)(5), ensure that participants have received QDIA notices and are aware of their investment options.

Ensure that participants have received fee and investment information required under ERISA Section 404(a)(5), which is generally effective August 30, 2012.

Document the above reviews along with the relevant investment options information, including discussions and decisions regarding the evaluation and replacement of investment options that do not meet required criteria. Maintain this documentation in a central due diligence file.

1 The publication “Meeting Your Fiduciary Responsibilities,” available from the DOL’s website (http://www.dol.gov/ebsa/publications/fiduciaryresponsibility.html) may be helpful for this purpose.
2 A comprehensive fiduciary training video program is available to T. Rowe Price plan sponsors at rps.troweprice.com/sponsor.
3 While a plan is not required to have an investment policy statement, ERISA encourages fiduciaries to get a policy in writing for the selection and monitoring of investment options. Your T. Rowe Price representative can provide you with a sample investment policy statement.


Conduct an annual (or more frequently, as needed) meeting with the retirement committee and plan fiduciaries. Record detailed minutes of these meetings, including all decisions made by the committee.

Ensure that committee members have been selected in accordance with the terms of the plan, and confirm that they have appropriate experience.

Review the process for collecting employee contributions and loan repayments, forwarding contributions and loan repayments to the service provider, and investing the contributions and loan repayments in a timely manner.4

Ensure compliance with the applicable Internal Revenue Code tests, such as:

• 401(a)(4)-2 rate group testing;
• 401(a)(4)-4 availability of benefits, rights, and features;
• 401(k)/ADP test;
• 401(m)/ACP test;
• 402(g) contribution limit;
• 410(b) coverage testing;
• 414(s) compensation ratio testing;
• 415(c)(3) annual additions contribution limit; and
• 416 top-heavy testing.

4 DOL regulations provide that participant contributions become plan assets as of the earliest date that they can be reasonably segregated from the employer’s assets.

Conduct an annual review of outside experts and service providers (including investment advice providers,5 plan consultants, trustees, and/or recordkeepers, etc.) to ensure that service and performance standards are being met. Document the review/meetings and issues discussed, as well as any decisions made during or as a result of the review/meetings.

Review the fees received from or charged by all outside experts and service providers to the plan (direct and indirect) to ensure complete understanding of all costs and services associated with those fees and whether inherent conflicts exist that may impact the objectivity of the advice received.

• Refer to DOL publication, Understanding Retirement Plan Fees and Expenses (http://www.dol. gov/ebsa/publications/undrstndgrtrmnt.html) for a description of how to evaluate your plan’s fees and expenses;
• DOL also makes available a 401(k) Plan Fee Disclosure Tool on its website at http://www.dol.gov/ ebsa/fiduciaryeducation.html, which provides a convenient way to compare and contrast fees and administrative costs; and
• The DOL publication, Selecting and Monitoring Pension Consultants – Tips for Plan Fiduciaries (http://www.dol.gov/ebsa/newsroom/fs053105.html) provides a list of questions that are intended to assist plan fiduciaries in better understanding inherent conflicts of interest that may affect the objectivity of the advice that plan sponsors and other fiduciaries receive from plan consultants and other service providers.

Before entering into a contract or arrangement with a “covered service provider,” ensure that you receive disclosures required under ERISA Section 408(b)(2) of fees, services, and related information.

Review contracts with experts and service providers, making sure the contracts:

• Are in writing;
• Do not contain provisions that conflict with fiduciary standards of care; and
• Do not authorize fees that are in excess of “reasonable compensation.”

Check the fidelity bond to ensure that it provides an appropriate coverage amount, 6 and that it covers fiduciaries as well as other employees or third parties involved with the retirement plan.

Ensure completion and filing of all required government reporting, such as Forms 5500 and 1099R.

Periodically review any administrative procedures adopted by the committee to ensure that they are consistent with the plan document.

Document all procedures and decisions and maintain the documents in a central due diligence file.

5 The plan sponsor has the fiduciary responsibility to select and monitor the performance of any investment advice (or guidance) service provider whose services are being offered to participants.

6 In general, the amount of the bond is 10% of plan assets (up to $1,000,000 if using company stock as an investment option).


Have ERISA counsel review the plan document to ensure that it has been updated for all required legislative provisions (e.g., PPA, EGTRRA, etc.), as well as discretionary plan design changes.

Maintain a summary plan description (SPD), updated for all plan design changes, and distribute it to all employees (ERISA requires that SPDs, summaries of material modification, and summary annual reports are automatically disclosed to participants/beneficiaries).

Confirm that written procedures for all plan transactions are consistent with the plan document and applicable regulations.

Verify that the plan covers the right employees, or does not exclude employees who may be entitled to participate in the plan.

Verify that the plan’s definition of an eligible employee is consistent with the way the plan is being administered.

Check the plan documents and trust agreements to ensure that the plan fiduciaries have been appointed properly.

Review the definition of compensation as defined in the plan document, and verify that the correct compensation amounts are being sent to the service providers and being used for the correct purpose.

If the plan document is a “prototype” document, make sure that it is IRS-approved and has been amended as required by IRS procedures.

Review the process for making plan loans, and verify that the processing loan by the service provider is consistent with the written procedures of the plan.

If the plan is intended to comply with ERISA Section 404(c), evaluate with ERISA counsel the plan’s compliance with the statute and the regulations issued thereunder.7

7 The determination of whether the requirements under Section 404(c) have been met requires a complex review of multiple facets of plan operation and available investments and should be reviewed with the assistance of ERISA counsel.


Provide ongoing communication on investments and plan features (e.g., loans, distributions, contributions, etc.). Communication and education efforts should be focused on the demographics of the participants.

Make sure that all communications are accurate and not misleading.

Distribute information to all eligible employees regarding the investment options available under the plan.

Conduct educational meetings, and provide general financial/investment information on the following topics:

• Participation in the plan;
• Saving for retirement;
• Diversification;
• Asset allocation, including asset class characteristics and historical return differences;
• Dollar cost averaging;
• Advantages of tax deferral;
• Risk/return concepts;
• Impact of inflation;
• Compounding; and
• Market behaviors (recession, etc.).

If the plan is intended to comply with ERISA Section 404(c), confirm that participants receive the following communications before investing:

• Notification that the plan intends to comply with 404(c);
• If there is company stock, a description of procedures established to maintain the confidentiality of information regarding a participants’ purchases, sales, voting, or tender of the stock.

The following requirements must also be met until ERISA Section 404(a)(5) becomes generally effective on August 30, 2012:

• A description of each investment alternative;
• A description of the rights and procedures for directing investments in the plan, along with limitations on those rights;
• A description of any transaction fees or expenses charged;
• Contact information for the fiduciary responsible for providing participants with 404(c) information on request; and
• A copy of the prospectus for mutual funds the first time a participant invests in that fund.

Confirm that participants receive the following items upon request:

• A description of the annual operating expenses of each investment alternative;
• Copies of any prospectus, financial statements, reports, and other materials provided to the plan about the investment option;
• If the investment option is not a mutual fund, a list of assets making up the option’s portfolio;
• Information concerning the value of shares or units in the investment option, including past and current performance information; and
• Information concerning the value of shares or units held in a participant’s individual account.

Maintain samples of all participant communications, including the date provided and to whom provided. In addition, maintain a record of the administrative procedures used to distribute the required disclosures.

Provide mandatory participant communication materials:

• Summary plan description;
• Summary of material modifications;
• Summary annual report;
• Participant account statements;
• Blackout period notice—if the plan is closing an investment option or suspending transactions—even temporarily;
• Participant fee and investment disclosures;
• Default investment notices, if applicable;
• Notice for “mapping” investments, if applicable;
• Notice for automatic enrollment, if applicable;
• ADP/ACP design-based safe harbor notice, if applicable; and
• Notice on the right to diversify holdings in company stock, if applicable.


Review and ascertain compliance with checklist items described above. Obtain fiduciary liability insurance (errors and omissions insurance).

Use qualified experts (individuals, firms, and sources with advanced knowledge and experience with qualified plans and fiduciary responsibilities) to assist plan fiduciaries.

Establish operating procedures for committees and follow them.

If it doesn’t currently, consider having the plan comply with ERISA Section 404(c).

Adopt plan provisions limiting participants’ holdings in nondiversified investments such as company stock. Provide a warning notice added by the Pension Protection Act to those participants with more than 20% of their account balance in company stock or any other stock, and ensure that diversification of employer matching and nonelective contributions complies with the Pension Protection Act.

Take steps to ensure that the company stock option is being managed in accordance with industry best practices, including:

• Establishing procedures in the IPS to evaluate the appropriateness of maintaining company stock as an investment option in the plan and specifying actions the fiduciaries should take if the stock experiences a significant and rapid decline in value;

• Appointing an independent fiduciary — typically a recognized expert outside of the company — to perform the monitoring function or to provide nonbiased advice where there is a potential or theoretical conflict of interest (i.e., where the plan fiduciaries could be said to have a conflict due to their status as officers of the plan sponsor issuing company stock); and

• Exercising caution in any communications to employees regarding the financial health or future prospects of the company.

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