By Philip J. Curtis
There have been two significant developments affecting the operation of qualified retirement plans recently.
First, on April 14, the Department of Labor released its long-awaited proposed regulations ("DOL Regulations") describing the circumstances in which a person who provides investment advice, in connection with a retirement plan or IRA, acts as a "fiduciary" under the Employee Retirement Income Security Act ("ERISA") and the Internal Revenue Code ("Code").
Second, on May 18, the U.S. Supreme Court issued an opinion in the case of Tibble v. Edison International regarding the duty of a "fiduciary" in the selection of investments for a 401(k) plan.
Both of these developments are important for employers who maintain qualified retirement plans for their employees.
The DOL Regulations include a broader definition of activities that would result in "fiduciary status" for investment professionals serving retirement plans and IRA owners. Fiduciary status is important because ERISA requires fiduciaries to act prudently and exclusively in the interests of the plan participants and beneficiaries. Fiduciaries are also restricted by the prohibited transaction rules of ERISA and the Code which constrain conflicts of interest.
In Tibble, the Supreme Court held that a retirement plan fiduciary has a continuing duty to monitor the investments chosen for the participants in a qualified retirement plan and not just at the time those investment options were originally selected. Even though the investment option might have been a good one at the time it was originally selected by the plan fiduciary, they must continue to re-evaluate the investment options on an ongoing basis.
Businesses with retirement plans should establish an investment committee consisting of management and plan participants who regularly monitor the investment options provided to your plan participants.
Legal counsel should be sought to ensure that you have the appropriate procedures in place to comply with the law and protect the plan fiduciaries as well as provide for the best interests of the plan participants.
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Philip J. Curtis is an attorney with Curtis, Curtis, & Brelinski PC in Jackson, focusing his practice on business law, employee benefits, estate planning, probate and trusts.) administration, tax and real estate. He can be reached at 517-787-9481, pjcurtis@curtiscurtislaw.com or online at www.curtiscurtislaw.com.
Published: Fri, Aug 14, 2015
