Search the Community

Consider this situation (hypothetical, but I hope grounded in enough reality to be useful for our BenefitsLink conversation). An employment-based retirement plan’s fiduciary seeks a rollover-IRA for default rollovers. The fiduciary receives three offers. Each offer presents a form of agreement closely based on 29 C.F.R. § 2550.404a-2(c)(3), including contract promises and warranties on all five conditions. Every offer represents and warrants that the IRA’s and its investments’ fees and expenses don’t and won’t “exceed the fees and expenses charged by the individual retirement plan provider for comparable individual retirement plans established for reasons other than the receipt of a rollover[.]” Yet these offers differ not only in their illustrations of the capital-preservation investment’s past performance (which anyhow might not predict future performance) but also in the current fees and expenses. If the fiduciary does no analysis, chooses one offer, and over the years it turns out to have had the highest fees and expenses and the worst investment performance, is the fiduciary nonetheless protected by the rule’s safe harbor? (Assume full disclosures, and that neither the selection of the IRA nor investing a rollover into it results in a nonexempt prohibited transaction.) If the fiduciary has some responsibility beyond what the safe harbor deems “satisfied”, what is that responsibility?