A fiduciary checklist for 401(k) sponsors is 79 items long

A checklist unveiled this week by a fiduciary training group is designed to help 401(k) sponsors protect themselves from lawsuits.

In June, the Center for Board Certified Fiduciaries projected that there are roughly 17.5 million people overseeing $26.6 billion in assets who are “lay fiduciaries,” industry outsiders who in many cases are in the dark about their legal responsibilities. That includes at least 3 million retirement plan sponsors, according to the group.

The new checklist, which the group calls FORT, or Fiduciary Oversight of Responsibilities and Tasks, will make them aware — outlining 79 different items that retirement plans must have covered, said Don Trone, CEO of CBCF. Given how rampant 401(k) litigation has become, that is crucial, he said.

“The vast majority of times, when you review the depositions associated with the 401(k) litigation … you hear that the plan sponsor had no idea about the depth and scope of their responsibilities and tasks,” Trone said.

The worksheet doesn't indicate that sponsors must handle each of the 79 tasks themselves, but it shows that they must delegate the responsibilities or hire fiduciaries who can address them, Trone said. By ensuring that the different tasks are handled by the adviser, third-party administrator, record keeper or other service provider, the plan sponsor can reduce its fiduciary liability, he said.

Such responsibilities include selecting and monitoring a 3(21) investment adviser, as well as tasking someone with enrollment and participant education, for example.

“[I]n a majority of cases, the plan sponsor has been left with a moral hazard,” as service providers have implied that they shoulder responsibilities that are not included in contracts, Trone said. “In reality, they’ve retained a lot of liability that they’re not aware of.”

The worksheet could also serve to discourage wealth advisers from taking on 401(k) plans, as it would show non-specialist firms the breadth of new responsibilities they could face, he said.

FORTHCOMING TRAINING

CBCF is planning to launch fiduciary courses in conjunction with a university that will provide professional marks in 10 different designations, such as a specialty in tax-exempt plans, Trone said.

“We have a number of specialty leaders who are developing the curriculum for board certification,” he said.

The training is being designed for experienced advisers and will help give them knowledge about all aspects of plan oversight, he said.

To receive the certification, “you not only need to know what you’re doing — you need to know what every other player is doing as well,” Trone said.