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4 responses to “Do Common Benchmarks Mislead the 401k Fiduciary?”

  1. August 28, 2013 | The Morning Pulse

    […] Do Common Benchmarks Mislead 401(k) Fiduciaries? […]

  2. Philip Koehler

    Good article, but your critique of Fred Reisch’s comments on fiduciary liability misses the fundamental fiduciary vs. settlor distinction embraced in trust law. Many of the plan “success” metrics you describe are settlor issues. While ERISA fiduciaries should always act consistent with the statute’s exclusive purpose rule, that doesn’t mean that every act that a plan sponsor can take that benefits or harms participants’ interests is a fiduciary act. The corporate actions establishing the plan, making discretionary amendments and ultimately terminating the plan are non-fiduciary settlor functions. In so doing the corporation is free to assign whatever weight they choose to the participants interests vs. the interests of other stakeholders. As a practical, in performing settlor functions management typically views “participant interests” as a subset of employee relations, which is critical to the success of the corporation, but ERISA wisely leaves them outside the scope of fiduciary responsibility.

  3. Philip Koehler

    The key success drivers of a 401(k) plan the perspective of the rank and file employee are average wages, discretionary plan design features and employer contributions, matching and discretionary profit sharing. Small plan sponsors generally pay lower wages, have more streamlined plans and make less robust contributions than large plan sponsors simply because they are less profitable business enterprises. Thankfully, this raises no ERISA fiduciary issues, because to the extent the plan sponsor is a fiduciary they aren’t exercising the discretionary authority and control that makes them a fiduciary in setting employee wages, making discretionary plan design decisions or determining the amount of employer contributions. That is why the success metrics, while completely legitimate concerns from a company management point of view, tend to fall outside areas of ERISA fiduciary responsibility.

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