4 Essential Elements of Every Retirement Plan
The United States Department of Labor (DOL) has issued a booklet entitled “Meeting Your Fiduciary Responsibilities.” The DOL created this publication to help Employee Retirement Income Security Act (ERISA) plan fiduciaries better understand their duties and obligations. The DOL provides the following four “essential elements” of all retirement plans:
- A written plan that describes the benefit structure and guides day-to-day operations;
- A trust fund to hold the plan’s assets (unless it’s set up as an insurance contract);
- A recordkeeping system to track the flow of monies going to and from the retirement plan; and
- Documents to provide plan information to employees participating in the plan and to the government.
The DOL does not require the plan fiduciary to personally conduct each of these tasks. Rather, the DOL understands the fiduciary may (and should) often desire to delegate these duties to professional third party service providers. The act of hiring a vendor, however, consists of a fiduciary act. This process should therefore be well documented and prudent. Without proper documentation, it’s more difficult for the fiduciary to prove due diligence during a DOL audit.