Goof fiduciary oversight is essential for limiting associated liability. Sponsors whose investments affect the employees’ retirement funds in the firms they invest in need this. Hauser Insurance explained some of the strategies to help in achieving this among them being, delegating some fiduciary functions to a plan administrator, and adhering to an Investment Policy Statement(IPS).
Hauser Insurance focused on the rise in class-action lawsuits relating to the Employee Retirement Income Security Act (ERISA). The law has been in play since 1974 and it defines terms for private companies‘ health and retirement plans. It is meant to protect employees by ensuring they receive a proper retirement and health plan.
The lawsuits were mainly due to supposed breach of fiduciary duty. Some were because sponsors charged too much fees for the plans. Hauser Insurance explained how such a lawsuit has a long and an expensive litigation process. Companies which decide to solve the issues in court end up paying millions for the fiduciary.
Hauser Insurance points out a company may be transparent in managing investment portfolios but it is not a guarantee they are safe from a lawsuit. Limiting and preventing fiduciary risks requires multiple strategies for protection.
Part of these protection strategies involve delegating some fiduciary functions to another party. The third party can be a plan manager or administrator. Their function is to manage the plan’s investment and assume any resultant liability. Having an investment or plan manager is a proper move to demonstrate to the court the investor’s commitment to staying compliant in case of litigation.
Additionally, the plan investor should have a written Investment Policy Statement which is encouraged by the US Department of Labor. The defined structure highlights when a fiduciary oversight can occur. It analyses the procedures for investment and includes details about the performance of a third party manager.