If you are involved in the administration of your company’s retirement plan, it is important to understand what your role as a plan sponsor entails, as well as how to delegate parts of your fiduciary responsibility if you choose to do so.

Even unintentional mistakes can lead to a breach of fiduciary duty that canhave significant consequences for your company and you personally.

Fiduciaries have important responsibilities and are subject to strict standards of conduct. However, plan sponsors may either not know who the fiduciaries to the plan are, or — and maybe worse — they think they know who they are, but they are incorrect.

WHO IS A FIDUCIARY?A fiduciary includes any person or entity using discretion in administering and managing a plan or controlling the plan’s assets. These may include individuals within your organization, a committee of your organization, your trustee, your financial advisor or vendors who provide investment advice to your plan or your plan’s participants.

In addition, each plan is required to have a named fiduciary. A named fiduciary is the fiduciary named or identified by the plan as having the authority to control the plan’s operation and administration.

Fiduciary status is largely based on the functions performed, not necessarily on someone’s title or assignment. So, individuals may be acting in a fiduciary capacity without even realizing it. They need to be aware of their duties and responsibilities.

There really is no way for an employer or a plan sponsor to completely delegate all fiduciary responsibility.

So you can see that it is critical for you to know whether or not you are a fiduciary, who all of the other people and institutions are that act as fiduciaries, and confirm that they know and understand their responsibilities.

One way to achieve clarity in the fiduciary functions is to insist that any service agreement you enter into with someone you believe is acting in a fiduciary role actually spells out the fiduciary relationship and associated responsibilities.

KNOWING IF FEES ARE “REASONABLE”Fees are another area where misconceptions abound. For example, plan sponsors know that the Department of Labor — or DOL — requires fiduciaries to confirm that fees are “reasonable,” but some think “reasonable” means “cheapest.”

Not so. The DOL was careful not to suggest that a plan fiduciary is obligated to find the lowest cost vendors. The obligation is really to confirm that the fees being paid are appropriate based on the quality and complexity of the services provided to the plan.

RESPONSIBILITY FOR FILINGS AND DISCLOSURESMisconceptions about filings and disclosures can potentially lead to trouble. Plan administrators need to make sure that all filings with the federal government are submitted in a timely fashion, and they’re also responsible for making any disclosures to plan participants.

If you’re getting filings, participant notices, et cetera, from your vendor, it’s critical that you know whether and when you are expected to do something withthem — or if they are for information only.

EIGHT TROUBLING MISCONCEPTIONS ABOUT DEFINED CONTRIBUTION PLANS

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The buck stops with the plan administrator, so that person or body needs to be sure that all the required filings and notifications are being made. Failure to do so can lead to significant monetary penalties. It’s not a defense to claim that you thought the vendor was taking care of it.

A compliance checklist that specifies and schedules out all of the various notices that need to be sent to participants and all of the things that need to be filed with the government can help you see at a glance when you need to take action.

Make sure you build in enough time to deal with the unexpected. If you make an error or miss a deadline, you may be able to self-correct. The Internal Revenue Service (IRS) has a program called EPCRS that allows sponsors to fix errors, either on their own or through an IRS filing. And the DOL has a program that allows you to correct delinquent Forms 5500. Find and correct errors, if you can, before you are audited by an agency.

The key notification document for 401(k) plan participants is the Summary Plan Description (SPD). This is a plain-English description of the plan. There is a misconception that you can just post it on your company’s website and that’s sufficient. However, in some cases you have to send a hard copy or deliver the SPD to plan participants in an email in order to meet the DOL’s safe harbor requirements. The email should either attach a copy or should contain a link that they can click that will take them directly to the SPD.

EMPLOYEE ELIGIBILITYEmployee eligibility is also a tricky subject. If there are certain categories of people who are working at the company but aren’t offered the opportunity to participate, you can face potential problems. If you’re not allowing everyone to participate, your plan document must clearly exclude those individuals.

Consultation with an experienced benefits lawyer is always a good idea.

“FREE” PLANSPlans that are perceived to be “free” are typically those where most or all of the plan’s expenses are baked into the expense ratios of the mutual funds offered under the plans. That’s actually okay as long as the plan fiduciaries are aware of the fees, and have done their due diligence as to whether or not they are appropriate for the plan of a similar size. You should confirm that the expense ratios are appropriate, and that you understand which, if any, plan-related services those expense ratios are paying for.

YOUR INVESTMENT POLICY STATEMENTYou or your investment fiduciary should confirm that your plan has an investment policy statement — or IPS — in place, that you are having regular and documented discussions about the plan’s investments, and that the documentation specifically identifies how the plan’s investments are or are not meeting the standards set forth in the IPS.

Remember, also, that if you have outsourced your investment fiduciary role to an ERISA 3(38) investment fiduciary, for example, the responsibility to confirm that the investment fiduciary is fulfilling its fiduciary responsibilities and adhering to its contractual commitments and to the IPS continues to lie with the plan sponsor.

For more information about fiduciary responsibilities, contact us at 1-855-303-0890 or visit www.pnc.com/vestedinterest.

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The PNC Financial Services Group, Inc. (“PNC”) uses the names PNC Wealth Management®, Hawthorn, PNC Family Wealth® and PNC Institutional Investments® to provide investment and wealth management, fiduciary services, FDIC-insured banking products and services and lending of funds, and the name Vested Interest® to provide non-discretionary defined contribution plan services and investment options through its subsidiary, PNC Bank, National Association, which is a Member FDIC, and uses the names PNC Wealth Management® and Hawthorn, PNC Family Wealth® to provide certain fiduciary and agency services through its subsidiary, PNC Delaware Trust Company. Hawthorn and PNC do not provide legal or accounting advice and neither provides tax advice in the absence of a specific written engagement for Hawthorn to do so. PNC does not provide investment advice to Vested Interest® plan sponsors or participants. PNC does not provide services in any jurisdiction in which it is not authorized to conduct business.

“PNC Wealth Management,” “Hawthorn, PNC Family Wealth,” “PNC Institutional Investments” and “Vested Interest” are registered trademarks of The PNC Financial Services Group, Inc.

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