Meet Your Fiduciary Obligations ... With a Little Help By John Schafer, VP, National Leader, Financial Institutions Channel, Pentegra When most banks established their retirement plan for their employees, they thought about the benefit that the plan will bring to those who work for the bank. They didn’t always consider the extent to which these benefits come with a cost. Of course, they know that plans cost money: not only do employees place their own earnings into the plan, but often the bank also contributes. And certainly, there are administrative costs. But banks who sponsor retirement plans should also clearly understand that they must run their plans with the greatest standard of care — or risk personal liability if they fall short. Employers Are Fiduciaries By default, bankers (plan sponsors) are fiduciaries of the retirement plans that they maintain. First, Section 3(16) of the Employee Retirement Income Security Act of 1974 (ERISA) defines “plan administrator” as the plan sponsor, unless a different plan administrator has been named. But in addition, ERISA Section 3(21) specifically defines a “plan fiduciary” as someone who has discretionary authority or responsibility for the administration of the plan. So, while it is possible — and often preferable — to delegate many plan-related duties to others, this ultimate discretionary authority rests with the bank: the authority to select suitable people or entities to carry out these delegated duties. Considering the complexity of current retirement plan rules, it’s not surprising that many Human Resources (HR) departments get tripped up at times. Over the decades, more and more requirements have been layered on top of one another, sometimes even in the name of pension “simplification.” Some common administrative challenges of operating a retirement plan include: • Enrolling employees when they become eligible. • Timely depositing participant deferrals and employer contributions. • Administering plan loan provisions. • Amending and restating plan provisions. • Properly correcting errors once they’re discovered. These are just a few of the areas in which HR departments can misstep. The list of possible 24 West Virginia Banker
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