3(16) Fiduciary Information
Being a Fiduciary for a retirement plan is more than just filling out forms, it requires a strong knowledge of the operation of the plan, the government guidelines and the requirements that go along with it.
What is a Fiduciary?
A fiduciary by definition, is a person or entity who owes a duty of care and trust to another and must act primarily for the benefit of the other in a particular activity. For retirement plans, the law defines the actions that result in fiduciary duties and the extent of those duties.
Many of the actions needed to operate a qualified retirement plan involve fiduciary decisions – whether that person or organization is a third party who manages the plan, or the plan management is done inhouse. Controlling the plan assets or using discretion in managing the plan makes the entity hired, the plan fiduciary to the extent of that discretion or control. Fiduciary status is based on the functions performed for the plan, not a title. Be aware that hiring someone to perform fiduciary functions is itself a fiduciary act. Fiduciaries are in a position of trust with respect to the plan participants and beneficiaries and require you to act solely in the in interest of those participants and beneficiaries. The responsibility to be prudent covers a wide range of functions needed to operate a plan.
Our Members Are Experts at ERISA Section 3(16)
Plan sponsors need to run their business to be successful and navigating retirement plan rules, regulations and reporting requirements does not usually fall into their schedule. While many plan sponsors are familiar with the liability related to plan investments and fees, the operation of the plan also carries fiduciary risk. The IRS and DOL impose penalties and fines on plans that have operational or reporting errors under ERISA Section 3(16). Cerrado Group members work as experts in this area and help industry professionals and business owners to navigate this important area of retirement plan administration.
3(16) Fiduciary Options and Information
These are areas that plan sponsors and industry professional should be aware of when working with retirement plans.
Following the Plan Document and Procedures
- Assist in establishing, implementing and modifying internal control
- Adopt amendments per Plan Sponsor’s direction
- Provide necessary 204(h) notices
- Interpret plan document provisions and make recommendations
Payroll-Related Services
- Confirm that salary deferrals and loan payments are properly reflected on pay date payroll reports
Participant Enrollment Responsibilities
- Provide initial participation paperwork
- Review and ensure auto-enrollment of participants, if applicable
- Review and ensure auto-increase of deferral rates of participants
- Review completed elections forms
- Advise fund holder, payroll service, Plan Sponsor of participant elections
- Record and Document Maintenance
- Retain completed election forms and beneficiary designations
- Maintain full copy of plan documentation
- Make plan document available to participants upon request
- Distribution and Loan Responsibilities
- Notify payroll provider of loan payments to be taken from payroll
- Confirm that loan payments are being taken from payroll
QDRO (Qualified Domestic Relations Order) Responsibilities
- Act as recipient for proposed QDRO submissions and determination of validity of proposed QDROs
- Communicate with participants, alternate payees and their representatives regarding proposed QDROs
- Approve segregation of alternate payee’s interest and authorize distribution to alternate payee
Reporting and Disclosure Responsibilities
- Sign government Form 5500, form 8955-SSA and Form 5330
Other Responsibilities
- Maintain fidelity bond
- Act as agent for service of legal process for the plan
- Annual meeting in person or via video conference
*All items listed are an example of offerings from different firms. Each firm will have its own distinct list of services offered and those offerings will vary.
