Employers fiduciary responsibility as Plan Administrator

[Guest tmdolf]

Our company had chosen The Vanguard Target Plan as it's 401(k) provider and Trustee.

What is required of the employer with regard to it's fiduciary responsibility? We've been advised that the DOL has specific requirements.

[MWeddell]

I'm not sure what specific requirements you're referring to. ERISA has many specific requirements (get a fidelity bond, must have a written plan document, etc.), but I don't think there's anything specific you need to do in regard to selecting Vanguard.

ERISA section 404(a) lists some very general fiduciary duties, including the duty to prudently select investments. You may take time to document what your process was, how you decided to choose Vanguard, etc., but there isn't DOL guidance regarding what specifically you must do.

[Guest rogersmore]

What is an employer's duty with respect to administering (rather than creating) the 401k plan and following an employee's directions regarding his investment choices? For example, if the plan is operating under the 404© participant-directed plan and an employee has selected his investment choices but because of an administrative or ministerial oversight, the employee's choice was not made and a default fund was chosen instead, then has the employer breached a *fiduciary duty*? What if the employee has had continuous control over the choices and received a montly statement, but did not bring the error to the employer or any other entity's attention for several years?

[Guest Phil L]

Your company has to comply with a number of basic fiduciary rules and requirements:

1. Exclusive Benfit Rule - fiduciaries must act with the exclusive purpose of providing benefits to participants and defraying reasonable expenses of administering the plan.

2. Prudent man standard - must act with the care, skill, prudence, and dilligence under the circumstances that a prudent man, acting in a like capacity and familiar with such matters would use........

3. Diversification - a fiduciary is required to diversify the investments so as to minimize the risk of large losses (but voluntary compliance with the requirements of 404© can help curtail this liability)

4. A fiduciary must act in accordance with the written terms of the plan document.

Entire books have been written on the obligations and requirements of the plan fiduciary. It may be wise for the fiduciaries to read about their obligations and the potential liability they have as fiduciaries.

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[Jon Chambers]

With regard to the 404© question, it's clear that 404© protection doesn't apply if the employee's direction isn't followed. Whether that is a fiduciary breach is a much more complex question. In terms of the general thread and question, selection of a bundled provider is just the tip of the fiduciary duty iceberg. I concur with the earlier posters, and suggest that the individual asking the question should engage a competent legal and/or investment advisor to get a complete explanation of fiduciary responsibility. It just can't be done in a message board format.