Plan Administrator Best Practices
The U.S. Department of Labor has never maintained that an ERISA plan must engage the highest rated, best performing or lowest cost vendors. The Plan Administrator may consider these performance metrics in developing appropriate performance benchmarks, but it is more important that it establish, document and follow reasonable fiduciary controls and procedures for the ongoing oversight of the vendors to ensure that their work is timely and accurately performed at a reasonable fee and they collectively maintain the plan’s compliance with all prevailing legal requirements.
EFA has adopted the following “Best Practices:”
- The roles and responsibilities of all involved parties (fiduciaries and non-fiduciaries) are defined, acknowledged in writing and consistent with the plan’s governing instruments;
- Fiduciaries and parties in interest execute declarations and provide sufficient disclosures to establish that they are free of conflicts of interest and not involved in self-dealing;
- Adequate ERISA Fidelity Bond coverage is maintained under EFA’s Blanket ERISA Fidelity Bond, which covers its employees and all of the Plan Sponsor’s inside fiduciaries (eliminating the need for the inside fiduciaries to secure their own bonding and allowing EFA to track the identities of the covered parties and the adequacy of their coverage in compliance with ERISA Section 412);
- Service agreements and contracts are in writing, and do not contain provisions that conflict with ability of plan fiduciaries to perform their fiduciary functions when viewed in the light of ERISA’s fiduciary standards of conduct;
- Investments are managed in accordance with applicable law, the plan’s governing instruments, including the investment policy statements (IPS);
- There is a process to periodically review the Plan Administrator’s effectiveness in meeting its fiduciary responsibilities.
- Each vendor demonstrates that it has the capacity to service its client base, its senior management has expertise and work history in the vendor’s field, it maintains Information systems and technology sufficient to provide the services for which it is engaged, and has a
clear management succession plan in place.
Each vendor executes declarations that it will automatically provide the disclosures required by ERISA Sec.408(b)(2) by the applicable deadline, and provide additional fee information upon written request by the Plan Administrator within thirty (30) days.
Each vendor provides a copy of all signed agreements that it has entered into with any other vendor providing services to the plan, or with any broker-dealer, sales professional, mutual fund company, insurance company, investment manager, investment advisor or other third party performing services to the plan.
- Appropriate administrative fee level benchmarks are established and periodically updated as part of the ongoing process of evaluating the reasonableness of administrative fees paid by the plan to each vendor.
- An RFP process is undertaken every 3-5 years to identify current participants in the vendor market place and formal evaluation of each current vendors’ fees, performance guarantees, relative ranking, capacity, etc.