FIDUCIARY RESPONSIBILITY PLAN INVESTMENTS

Transcription

1 Barbara Appleby, JD, MA, AIF Kristin Guibord, MBA, AIF KNOW YOUR PLAN RESPONSIBILITIES FIDUCIARY RESPONSIBILITY PLAN INVESTMENTS SECURITIES OFFERED THROUGH COMMONWEALTH FINANCIAL NETWORK MEMBER FINRA / SIPC. Investment advisory services may be offered through Commonwealth Financial Network, a registered investment adviser, and/or BerryDunn Wealth Management, LLC, a state-licensed investment adviser. Advisory services and fixed insurance products and services offered by BerryDunn Wealth Management, LLC are separate and unrelated to Commonwealth.

2 TOPICS OF DISCUSSION 1. Who is a plan fiduciary? 2. What are the fiduciary s responsibilities? Overall Plan Investments 3. Fiduciary Best Practices Plan Investments.

3 FIDUCIARY RESPONSIBILITY Who is a Fiduciary? Fiduciary by Title Named fiduciary Trustee Fiduciary by Act Anyone who exercises any discretionary authority or control with respect to the management of the plan or its assets, or in the administration of the plan. Functional definition of fiduciary.

4 FIDUCIARY RESPONSIBILITY Responsibilities of a Plan Fiduciary. ACT PRUDENTLY ACT WITH LOYALTY FOLLOW PLAN DOCUMENTS DIVERSIFY INVESTMENTS KEEP FEES REASONABLE

5 Establish an Investment Committee Not a legal requirement, but support the requirement for procedural prudence. Members have experience and expertise in investment matters. Members with less investment expertise, but perspective on the nature and needs of the workforce. Consider the time commitment and the willingness of potential members when making member selections.

6 Adopt an Investment Policy Statement (IPS) Provides guidelines and policy direction for selection and monitoring of investment options and service providers. Defines which asset classes will be offered in the plan and intent to offer a diverse range of investments. Defines criteria for evaluating and selection of investment options. Identifies benchmarks used for performance review of investments. States frequency of and process for review of investments.

7 Implement Investment Process Select investments in accordance with Investment Policy Statement. Conduct annual meeting for in-depth review of investment performance and overall investment lineup. Use criteria identified in the IPS to add or replace investment. Conduct check-up meetings to monitor fund performance. Document all meetings and decisions and maintain a file.

8 Ensure Compliance with ERISA 404(c) 404(c) provides that if a plan gives participants direct control over their assets, plan fiduciaries may be relieved from potential liability for losses resulting from participants investment decisions.

9 Ensure Compliance with ERISA 404(c) Basic requirements under 404(c) Must offer a broad range of investment alternatives (at least 3) with materially different risk and return profiles. Participants must be able to change their investments with frequency appropriate in light of the volatility of the investment options. Participants must be provided certain information intended to permit them to make informed investment decisions.

10 Provide Education and Advice to Participants Participant education is NOT a duty of a plan fiduciary. HOWEVER Promoting participant success in achieving retirement goals is an element of procedural prudence required by fiduciaries.

11 Provide Education and Advice to Participants, Continued Education versus Advice Goals are the same: Lead participants to diversify their accounts according to the asset allocation strategy best for them. Key difference: Giving investment advice is a fiduciary act. Giving investment education is not. What constitutes advice? Gathering personal information about a participant s situation, needs and goals in order to advise them on a particular course of action.

12 Utilize, select and monitor outside experts Goal is to promote procedural prudence by filling gaps in the fiduciaries expertise and provides for an independent informed expert s view. ERISA encourages the use of outside consultants. May include investment professional, lawyer, auditor, or consultants. Selection criteria should include expertise, credentials, references and fees. Have process to monitor and evaluate all third-party experts and service providers.

13 Good Fiduciary Habits are all about PROCESS Old adage: Prudence is process Even better might be Prudence is process but only if you can prove it. Having a process you consistently follow and document is more important than making the right decision. Fiduciary liability is not measured by investment performance, but by the process that guides the investment choices.

14 Reference Material and Guides: U.S. Department of Labor: Check with your 401k Platform provider. Some have very well-produced and easy-to-understand guides written for plan fiduciaries.

15 CONTACT INFORMATION We are always available for your questions. Barbara Appleby, JD, MA, AIF Kristin Guibord, MBA, AIF Middle Street, Portland, ME SECURITIES OFFERED THROUGH COMMONWEALTH FINANCIAL NETWORK MEMBER FINRA / SIPC. Investment advisory services may be offered through Commonwealth Financial Network, a registered investment adviser, and/or BerryDunn Wealth Management, LLC, a state-licensed investment adviser. Advisory services and fixed insurance products and services offered by BerryDunn Wealth Management, LLC are separate and unrelated to Commonwealth.