Leveraging Plan Administration while Maintaining Your Fiduciary Responsibility
Under ERISA, employee benefit plan administrators have complete responsibility for all administrative functions of the plan. This includes everything from selecting service providers and investment management to maintaining accurate minutes that document the decision-making processes.
Selecting the third-party administrators (or TPAs) that will service a plan, as well as determining the level of service to be provided, is a major decision for fiduciaries. Often, plan administrators may decide to outsource many of the time-consuming, day-to-day processes that are necessary to administer their plans. While leveraging administrative processes to TPAs can be an attractive option for plan administrators, it’s essential to understand the role the TPA is playing in such processes – which is that of an agent. In the eyes of the IRS and DOL, the plan administrator retains all fiduciary responsibilities, regardless of who is physically processing transactions.
Here are just a few best practices plan administrators can follow to avoid overreliance on TPAs:
A clear line between service provider functions and plan administrator functions is crucial, but it is not the only factor in maintaining fiduciary responsibility. Plan administrators have an obligation to ensure that employees are given every chance to maximize their benefits – which is done through monitoring of providers, investments, fees, and new regulations, as well as increasing employee awareness of the plans offered. We have included some basic steps below that you, as plan sponsors, can take to achieve these obligations.
By following some basic best practices, plan administrators can help with the efficient, compliant operation of the plan. At the same time, adhering to these practices can also help mitigate the liability associated with failure to fulfill their fiduciary duties.
Rachel L. Gilbo?>
About the Authors
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