Fiduciary Rule and its impact towards a 401k plan as the trustee

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artgerst
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Fiduciary Rule and its impact towards a 401k plan as the trustee

Post by artgerst » Fri Jun 16, 2017 8:58 am

I run a company and we have a 401k plan with TRowe Price. They essentially run the plan (Compliance, 5500 forms, etc). I guess I am the trustee (I think that's the right term). I contribute to the plan for my employees based on pre-tax withholdings.

Recently TRowePrice called me to warn me about the new Fiduciary rule that went into effect last week. They suggested that either we get an advisor or write up our own Investment Policy Statement. I was surprised by the call since I didn't think the fiduciary rule impacted 401k plans, but I guess it does.

As a trustee to the plan what are the recommended things we should do/have in place? I know we have an ERISA Bond (I think that's required by the plan). Thoughts on additional insurance? Thoughts on an Investment Policy Statement?

In general, I see hiring an advisor as something that goes against my normal thought process. We have a collection of basic funds in the plan including mostly index funds, life-cycle funds and other low-fee funds (or as low-fee as TRP gets).

They actually mentioned on the phone that we should follow the performance of the funds by year and if something is doing really bad we should remove it. I can't believe they said that, but they did. THAT I found really strange. When I asked for more details, they said "look at the Department of Labor site".

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EATaxGuy
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Re: Fiduciary Rule and its impact towards a 401k plan as the trustee

Post by EATaxGuy » Fri Jun 16, 2017 11:31 am

When TRP gives thorough, thoughtful advice like that to their clients, why on earth do we need a fiduciary rule? :oops:

I think I'd have an ERISA lawyer come in for a consultation. You're the fiduciary for the plan, so not knowing if you're compliant is not an option.

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TIAX
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Re: Fiduciary Rule and its impact towards a 401k plan as the trustee

Post by TIAX » Sun Jun 18, 2017 10:02 am

You do have a duty to monitor plan investments but since the whole point of an index fund is to track the market, a fiduciary shouldn't care whether the index fund goes up or down with the market but may have a duty to ensure the fund is tracking the index, whether there is a less expensive index fund that tracks the same index, etc. See this article. I don't think you should worry too much but having an initial consultation with an ERISA attorney is a good idea.
Last edited by TIAX on Sun Jun 18, 2017 10:38 am, edited 1 time in total.

artgerst
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Re: Fiduciary Rule and its impact towards a 401k plan as the trustee

Post by artgerst » Sun Jun 18, 2017 10:05 am

TIAX wrote:You do have a duty to monitor plan investments but since the whole point of an index fund is to market, a fiduciary shouldn't care whether the index fund goes up or down with the market but may have a duty to ensure the fund is tracking the index, whether there is a less expensive index fund that tracks the same index, etc. See this article. I don't think you should worry too much but having an initial consultation with an ERISA attorney is a good idea.
Good link. Thank you.

TIAX
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Re: Fiduciary Rule and its impact towards a 401k plan as the trustee

Post by TIAX » Sun Jun 18, 2017 10:21 am

artgerst wrote:
TIAX wrote:You do have a duty to monitor plan investments but since the whole point of an index fund is to market, a fiduciary shouldn't care whether the index fund goes up or down with the market but may have a duty to ensure the fund is tracking the index, whether there is a less expensive index fund that tracks the same index, etc. See this article. I don't think you should worry too much but having an initial consultation with an ERISA attorney is a good idea.
Good link. Thank you.
No problem. Although I doubt it's worth paying for, you could consider hiring a fiduciary so that your liability is limited.

livesoft
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Re: Fiduciary Rule and its impact towards a 401k plan as the trustee

Post by livesoft » Sun Jun 18, 2017 10:24 am

I was a fiduciary for my previous employer's 401(k) plan. I would not touch a plan without an Investment Policy Statement in place. That's normal. If in fact you all don't have an IPS, then TRP has done you a disservice. They should have a boilerplate IPS for all their 401(k) plans that they can give you. If you switched providers/custodians, then the new one would have a IPS.

And all this was before any of the Fiduciary rule changes because 401(k) plans had fiduciaries all along. If the 401(k) sponsor and "committee members" were following the IPS, then there is less chance a lawsuit would prevail, but if they violated the IPS, then that's grounds for a successful lawsuit.
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retiredjg
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Re: Fiduciary Rule and its impact towards a 401k plan as the trustee

Post by retiredjg » Sun Jun 18, 2017 11:11 am

I'd keep an eye out for an updated version - that one is dated 2012. If not a complete update, it seems a good idea to be familiar enough with the new policy to know if anything changed. However, I don't think the new policy was aimed much at employers, but more at "advisors".

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Hub
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Re: Fiduciary Rule and its impact towards a 401k plan as the trustee

Post by Hub » Wed Jun 21, 2017 12:53 pm

following

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