Partnering for Success – Fiduciary Role

Offering a high-quality qualified retirement plan, especially in a tight labor market, helps attract and retain talent. Along with offering employees a retirement benefit, employers hold an important fiduciary role to keep the plan in good order through plan administration and following regulatory compliance. Ignoring fiduciary responsibilities may lead to penalties from the Internal Revenue Service (IRS) or Department of Labor (DOL). Although an employer may never completely absolve themselves of fiduciary responsibilities, Greenleaf Trust partners with clients to assist with plan administration and fulfilling their fiduciary responsibilities.

Investment Review

As a fiduciary, the employer’s duty to act prudently is evidenced by having processes in place for making fiduciary decisions in relation to mutual funds offered in the plan and the documentation of those decisions. The actual performance of the funds is less imperative than ensuring that there is a process in place for the addition and removal of the funds. Greenleaf Trust assists the Plan Sponsors with their fiduciary review by providing the annual Mutual Fund Due Diligence Report, which ensures written documentation with regard to the selection and ongoing analysis of mutual funds recommended for client use. Additionally, Greenleaf Trust provides the Investment Policy Statement, documenting the plan’s approved designated investment alternatives, and the qualified designated investment alternative. Other documentation such as employer retirement plan committee meeting minutes should be kept to document employer’s evaluation of mutual fund investments and their final offerings decision to demonstrate the employer is compliance oriented and aware of fiduciary duties.

Investment Selection

In some cases, Greenleaf Trust serves as a 3(21) Directed fiduciary as defined in Section 3(21) of ERISA, with the final investment selection directed by the Plan Sponsor. If the Plan Sponsor desires Greenleaf Trust to be the final decision maker on investment decisions, they may elect to have Greenleaf Trust serve in the capacity as a 3(38) Discretionary fiduciary, investment manager. Fiduciaries have the duty to act prudently and in the interest of the plan participants and their beneficiaries at all times. A fiduciary may not have the expertise in a specific area such as investment selection, and thus may hire a fiduciary for support with fulfilling its fiduciary role.

When Greenleaf Trust is asked to serve in the capacity of investment manager holding the responsibility for determining the mutual fund investment offerings within the retirement plan, the Plan Sponsor no longer needs to evaluate, monitor and provide final investment direction decisions. The Plan Sponsor is responsible for reviewing Greenleaf Trust’s process of due diligence analysis in selecting investments and receipt of the annual Mutual Fund Due Diligence Report.

Plan Review

Greenleaf Trust Relationship Managers offer Plan Sponsors the opportunity to meet to review the overall retirement plan from a fiduciary and compliance perspective at least every 12 to 16 months. These reviews typically cover topics such as a high-level financial summary, investment review, employee participation, regulatory changes, and employer level system access along with report delivery.

Payroll Administration

The Plan Sponsor should monitor for accurate payroll submission per the employee’s deferral election or automatic enrollment into the plan along with the deferral calculation per the definition of compensation. For example, the elected deferral should not be calculated including bonus compensation, if bonus compensation is excluded from the plan’s definition of compensation. Greenleaf Trust supports client payroll administration by emailing eligibility, deferral changes, and automatic reports each Friday, when applicable. As part of payroll due diligence, the Plan Sponsor should compare all the participant elections on Greenleaf Trust’s website to the payroll file to ensure they match. If any discrepancies are identified and corrected promptly, the correction will be less costly to the employer and additional penalties will not be incurred.

Employers are responsible for timely submission of salary deferrals from an employee’s paycheck. With the technology available today, the DOL is consistent in its position that salary deferrals contributions must be deposited to the plan as soon as possible following the date funds are withheld from pay. Greenleaf Trust sends an email within three days of the pay date to notify the employer to upload the payroll file and forward funding to us immediately to avoid potential IRS reported late payrolls, lost earnings expenses and penalties.

Education Meetings

Most defined contribution retirement plans operate under ERISA Section 404(c) relief as a participant-directed plan, which means the participants are making the investment decisions. With the liability relief ERISA 404(c) may offer from any loss participants incur from their investment direction, it is important as a fiduciary that you can demonstrate education meetings and/or individual consultations were offered on a continuous basis. Further, it is best practice to retain records of attendance, education materials provided and communications provided to employees on retirement plan education opportunities.

Missing Participants

Although onerous at times, a plan fiduciary must make reasonable attempts to locate missing participants to ensure they receive required plan notices and a proper distribution of the account balance. The employer can search for the missing participant using electronic search tools, or contacting the participant’s designated beneficiary. Care should be taken to ensure participant privacy and verification of the participant, if a better address is located. To assist Plan Sponsors in fulfilling their obligation, Greenleaf Trust periodically notifies employers of missing participants. Greenleaf Trust also provides scripting for employers to use, which directs the participant to contact Greenleaf Trust’s Participant Support Call Center for address updates and verification.

Plan Document

The administration of a plan is governed by the plan document. As fiduciaries, employers must ensure the plan document is in good order. Greenleaf Trust offers an IRS-approved prototype plan document for most clients. Upon a plan design change, such as adding a provision, or a change in legislation, Greenleaf Trust will update the written plan document. Additionally, the IRS mandates all pre-approved plan documents be restated on a 6-year cycle; the Cycle 3 restatement period is effective August 1, 2020 to July 31, 2022. Greenleaf Trust is in the process of restating plan documents and incorporating the mandatory amendments for the Bipartisan Budget Act (BBA), in relation to the hardship provisions, and enacted CARES Act provisions.

Participant Required Notices

By law, fiduciaries are required to provide disclosures of specific plan and investment information to participants. In many instances, Greenleaf Trust provides notices on behalf of the Plan Administrator such as the quarterly and annual Participant Fee Disclosures and Qualified Default Investment Alternative notice. Additionally, the design of the plan may require annual Safe Harbor Notices or an Automatic Enrollment notice. In 2020, final electronic disclosure regulations were passed for the distribution of required notices. The Greenleaf Trust website is being updated to house the required notices and the Summary Plan Description. Participants will receive an email alert that a required document has been posted to the website.

As always, Greenleaf Trust is here to assist. We appreciate your business and the trust that you place in us to work on your behalf.