Fiduciary responsibility. Liability under ERISA. Compliance.
Seems a little daunting when it’s laid out like that, doesn’t it? As a government contractor it’s important to understand the risks and benefits associated with choosing a third-party provider to administer your benefits plans. Read on to learn more:
Plan fiduciaries are the individuals or entities that manage an employee benefit plan and its assets. Per ERISA, a plan must have at least one fiduciary named in the plan, in writing. Most often, the employer is the Plan Administrator, or named fiduciary. Additionally, Trustees, investment advisers, and other entities or individuals who exercise discretion over plan assets may also be plan fiduciaries; attorneys and accountants that are acting solely within their professional capacity, or others who are providing ministerial services only, are not plan fiduciaries.
It is imperative to understand that even if an employer uses a third-party service provider, that employer, as the Plan Administrator named fiduciary, has fiduciary responsibilities. In fact, the named fiduciary has the most extensive responsibility, which includes all phases of plan management. Failure to properly exercise that fiduciary responsibility can make the employer culpable for any negligence or wrong-doing on the part of the third-party service provider the employer chose to provide the services.
ERISA defines the responsibilities of the plan fiduciary as follows:
- The Duty of Loyalty: The Duty of Loyalty requires the fiduciary to act solely in the interest of the plan participants.
- The Duty of Care: This duty requires a fiduciary to act with the care, diligence, and skill under the circumstances that a prudent person, acting in a like capacity and with the same expertise, would use in a similar enterprise.
- The Duty to Provide Investment Diversification: This duty requires the diversification of plan investments to minimize the risk of large losses unless it is not prudent to do so, under the circumstances.
- The Duty to Adhere to Plan Documents: This duty requires that the fiduciary must act in accordance with governing plan documents and instruments that are consistent with ERISA.
Fiduciaries can also be held liable for the acts, errors, and omissions of outside entities that provide services to the benefit plan. This can include organizations that service pension and benefit plans, consulting firms, law firms, accounting firms, investment advisers, and trust departments.
When choosing an employee benefits company, you’re choosing more than just an entity to handle your administrative and employee benefit needs. You’re choosing to take part in a working relationship that requires trust. For 35+ years, The Boon Group has succeeded with a model of creating strong relationships and providing meaningful benefits. We believe healthcare should be flexible, affordable, and, most of all, transparent and compliant.
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