Fiduciary Responsibility Question

[khn]

Opinions needed, please - A plan is recordkept at a large, well-known financial services firm. The firm offers a budgeting tool that is accessible on their website and participants can sign up for it on their own, outside the plan, for a fee. The contract is between the participant and the vendor for the tool.

The tool is not offered within the Plan and the company has no involvement with the tool. Does the company have any fiduciary responsibility around the tool, simply because it is available on the recordkeeper's website where participants access their account? 

 

 

[Madison71]

My initial thought is there is no issue here.  Budgeting tools are often on recordkeeper websites. But, then I remember there was a recent amended complaint (Vanderbilt I believe where TIAA-CREF is the recordkeeper) claiming that Vanderbilt allowed TIAA to use its access to participant data to selling insurance and products outside the plan?   The claim alleged that this was improper and that Vanderbilt violated the exclusive benefit rule.  Similar parallels here? We shall see what comes of that.
 

 

[Peter Gulia]

Counts VIII and IX in the second amended complaint in Cassell v. Vanderbilt University assert fiduciary breaches and prohibited transactions based on allegations that the plan’s fiduciaries allowed TIAA to use participants’ information for purposes beyond performing or providing TIAA’s recordkeeper services.

 

But what if the retirement plan’s fiduciary:

 

evaluates the communications and disclosures about the budgeting service, and finds they fairly describe the service, its fees, and its risks;

 

evaluates the budgeting service, finds it is not inherently dangerous, and finds that an unknowledgeable person can make his or her own evaluation of the service;

 

negotiates a recordkeeping fee that reflects an expert’s report on the value of allowing access to the participants for cross-selling; and

 

discloses to participants that the fiduciary made this deal to lower participants’ expenses, and communicates to them that they must carefully evaluate the budgeting service for themselves.

 

Could facts like these set up an explanation that a fiduciary acted loyally and prudently?

 

[Madison71]

I certainly think that presents a strong answer to that amended complaint 

[Luke Bailey]

More briefly, the plan administrator could, I'm sure, prevent the tool from being presented to the plan's participants, and so is passively deciding to permit it to be presented in association with the plan. So sure, they have some responsibility to know what the tool does and determine whether they think it's suitable.