The central role of the recordkeeper can create reverberations with other providers should the plan sponsor attempt to change recordkeepers. Any hiccup in the employees’ ability to manage their retirement assets can cause problems for plan sponsors.
Tag "liability"
It’s too easy for plan sponsors to get lost in the weeds when dealing with plan minutia. Yes, “the buck stops here” reality can overwhelm many. Delegation is the key. It’s also the Achilles Heel. This is where the magic word emerges.
“Industry participants also argue that the rule transforms one-off transactions into fiduciary relationships in violation of the common law, but the common law of the states is divided on this, and there is a need for a federal standard regulating investment advice fiduciaries.”
This isn’t a compliance audit, it’s an operating efficiency audit. That covers plenty of ground, from technology to benchmarking the value offered by the service provider.
If plan sponsors are working with the appropriate plan fiduciary, then an ongoing review of the fund’s performance, fees, and underlying risk should be part of their ongoing process
Herein lies the potential for a direct conflict of interest. This applies generally to all proxy voting in commingled portfolios.
Since actively managed funds have lagged index funds, does this case put their continued use in ERISA plans at risk?
Plan sponsors need to think about it in these terms: Does it make sense to have a pork-belly ETF on a 401k investment menu? How about orange futures?
The process of transferring assets is not without its own liabilities. The exact nature of the fiduciary risk depends on the nature of the transfer.
The DOL seems to use the same metric that it earlier employed in its statement on the Fiduciary Rule. Still, the Advisory Opinion is very precise in what it allows. Citi will have to tread carefully to not cross the line into the realm of fiduciary.
