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New York Life Retirement Plan Services

Fiduciary Education

A Guide to

In t roduct ion The purpose of this guide is to help you understand the roles

and responsibilities associated with being a plan fiduciary.

This is an important function that may carry significant legal

liability. The proper understanding of your duties can help

you reduce risks to both the plan and yourself.

You can find additional guidelines from the U.S. Department of Labor online at www.dol.gov/ebsa/publications under the title “Meeting Your Fiduciary Responsibilities.”

The information contained herein is general in nature and is provided solely for educational and informational purposes. Neither New York Life Retirement Plan Services (New York Life) nor its affiliates provide legal, accounting or tax advice. You should obtain advice specific to your circumstances from your own legal, accounting and tax advisors.

ManagementThe person exercises any discretionary authority or discretionary control respecting management of the plan, or exercises any authority or control respecting management or the disposition of assets.

Investment advice The person renders investment advice for a fee or other compensation, direct or indirect, with respect to any assets of the plan.

AdministrationThe person has any discretionary authority or discretion-ary responsibility in the administration of the plan. This includes the plan administrator and anyone else allocated discretionary authority or responsibility over the plan’s administration.

ManagementAny decision maker who helps to decide how the plan is administered and what investments are in it.

Investment advice An advisor who may provide investment advice to a plan or its participants for direct or indirect compensation.

AdministrationAny person who exercises discretion with respect to the day-to-day operations of the plan, including the “Plan Administrator” as designated in the Summary Plan Description (usually the plan sponsor or a designated retirement plan committee).

You are not a fiduciary if you:• Applyrulesestablishedbyotherstodetermine

eligibilityforparticipationorbenefits

• Calculateserviceandcompensationforbenefitpurposes

• Prepareemployeecommunicationsmaterial

• Maintainparticipants’serviceandemploymentrecords

• Preparereportsrequiredbygovernmentagencies

• Calculatebenefits

• Explaintheplantonewparticipantsandadviseparticipantsoftheirrightsandoptionsundertheplan

• Processclaims

• Makerecommendationstoothersfordecisionswithrespecttoplanadministration

What i s a F iduc iary? General definition A fiduciary is a person, company or association that holds assets, property or power in a trust for a beneficiary. In other words, it is someone entrusted with the duty to act for the benefit of someone else.

ERISA definition Under ERISA, you are a fiduciary if you:• Havediscretionaryauthorityorcontrolover

themanagementoradministrationofaplan,or

• Renderinvestmentadvicetoaplanoritsparticipantsforafee

You are a fiduciary if you:• Appointotherplanfiduciaries

• Delegateresponsibilitytoorallocateamongotherplanfiduciaries

• Selectormonitorplaninvestmentoptions

• Selectandmonitorthird-partyserviceproviders

• Giveinvestmentadvicetotheplanforcompensation

• Acquireordisposeofplanassets

• Exercisediscretionundertheplan

ERISA DESCRIPTION PLAIN ENGLISH DESCRIPTION

What are Your Respons ib i l i t ies as a F iduc iary?The responsibilities of an ERISA fiduciary have been described

as “the highest known to the law.” — Donavan v. Bierwirth 680 F. 2d 963 (2ndCir. 1982)

You have three primary duties as a fiduciary.

DUTY

Administer the plan for the exclusive benefit of plan participants and beneficiaries.

Operate the plan according to the plan documents.

To act prudently.

WHAT IT MEANS

As fiduciary, you must always act in the best interests of the plan and its participants. Avoid personal and business conflicts of interest. Do not charge unallowable expenses, that is, so called “settlor function” expenses, i.e., establishment, termination, or design expenses, to the plan.

Ensure that all plan communications — Summary Plan Description, forms, etc. are consistent with the plan document. If they are not, they must be corrected.

If a fiduciary does not have the expertise one must either prudently delegate or obtain independent expert advice. Even after appointing or obtaining an expert, you still need to carefully evaluate and monitor that expert’s advice.

The doctrine of “procedural prudence” focuses on the process by which a fiduciary decision was made not necessarily the result of the decision.

ERISA REQUIREMENTS

To satisfy the “exclusive benefit” requirement, a fiduciary must act solely in the interest of the plan’s participants and beneficiaries, and for the exclusive purpose of providing benefits to participants and their beneficiaries and defraying reasonable administrative expenses of the plan.

A fiduciary must act in accordance with the documents governing the plan, to the extent the documents are consistent with ERISA.

ERISA’s prudence standard is that of a prudent expert.

But the test of prudence is one of conduct, not results.

Bob is a fiduciary of the ABC Company Plan. He urges his fellow fiduciaries to select an investment product for the plan knowing his son will receive a commission.

ABC Company makes paper clips. One of its biggest clients is the XYZ Fund Company. Bob thinks adding the XYZ Growth Fund to the Plan will help ensure a good relationship with the fund company.

Alice is an administrative assistant for the ABC Company. She spends approximately one-third of her time working on the Plan. Her employer charges her full salary to the Plan.

Fiduciary Bob discovers that the vesting schedule posted on the company’s intranet site does not match the schedule in the SPD. He fails to correct it.

The ABC Company plan document provides an annuity as a form of distribution. However, the annuity is not calculated and reflected on the plan’s distribution forms.

Fiduciary Bob wants to select an annuity for his defined benefit plan solely on the basis of price.

Bob selects a local bank to provide administrative services to his company’s 401(k) plan.

Fiduciary L iabi l i t ies Direct liabilityERISAmakesafiduciarypersonallyliableforanybreachofresponsibilityheorshecommits,eitherbyactoromission.

Co-fiduciary liabilityERISA makes a fiduciary liable for another fiduciary’s breach under the following circumstances:

1.Knowingparticipationorconcealment

2.Enablingabreachtooccur

3.Failingtotakereasonablestepstoremedyanotherfiduciary’sbreach

“Deeper pockets” ruleThroughco-fiduciaryliability,afiduciarywith“deeperpockets”ultimatelymayberesponsibleforrestoringthelosstotheplan(orparticipantorbeneficiary),ratherthanthefiduciarydirectlyliableforthebreach.

EXAMPLES OF FIDUCIARY BREACH OF RESPONSIBILITY

How New York L i fe Can He lpPut our processes and expertise to work for you. We have ample

resources to help you satisfy your fiduciary requirements.

AdministrationWe can help you fulfill your fiduciary obligations to administer your plan(s) for the exclusive benefit of plan participants and beneficiaries by providing the following services.

• Assistinginthepreparationofplancommunicationmaterials

• Coordinatingcommunicationsmaterialsdeliveredtoparticipants

• Providingprospectusdelivery

• Offeringparticipantsonlineaccesstoplaninformationsotheycanviewtheirinformationandmaketransactions,ifapplicable

• Performingauditsofplanprocedures

OperationWe can help you operate your plan according to plan documents by providing the following services.

• Performingperiodicreviewsofplandocuments

• MaintainingaSAS70auditedprocedure

• OfferingClientAccessonlineplanmanagementtools

• FurnishinganAdministrationManualsoyoucanunderstandplanprocedures

• Outsourcingcertainplantransactions,suchashardshipsandQDROs

• OfferingNewClientOrientationandperiodicfiduciaryeducationtraining/audits

Investment selectionWe can help you in your investment selections by providing the following services.

• AssistinginthepreparationofanInvestmentPolicyStatement

• Offeringadiverserangeofinvestmentssuitableforretirementplansincludingoptionsintendingtoqualifyas“qualifieddefaultinvestmentalternatives”

• Performingasset-liabilitymodelingfordefinedbenefitplans

• OfferingNewYorkLifeInvestments’PortfolioCompleteprogram,underwhichMorningstarAssociates,LLCfunctionsasafiduciarybyofferingadviceintheselectionandmonitoringofyourplan’sinvestmentoptions

• ProvidingdetailedinformationaboutinvestmentoptionsthroughMorningstar®OnlineSMandofferingaccesstoPortfoliosAssetAllocationProgram*

• OfferingtheabilityforyoutoselfmonitorviareportsonClientAccess

*Morningstar®RetirementManagerSMisofferedbyandisthepropertyofMorningstarAssociates,LLC,aregisteredinvestmentadvisorandsubsidiaryofMorningstar,Inc.,andisintendedforcitizensorlegalresidentsoftheUnitedStatesoritsterritories.TheMorningstarnameandlogoareregisteredmarksofMorningstar,Inc.

Steps to Reduce R iskAs a fiduciary, you can never eliminate risk. But you can reduce and

manage risk by taking the following steps.

Ask an expertYour first step in reducing risk as a plan fiduciary is to understand your obligations. Your New York Life ERISA Consultant can assist you in understanding your obligations.

Document, document, documentAs ERISA’s test of prudence is one of conduct (i.e., the process followed in making a fiduciary decision), it makes sense to keep accurate, comprehensive records.

• Makesureyouhaveestablishedconsistentoperationalpolicies.

• Keepminutesofanymeetings.

• FollowclaimsproceduresasoutlinedinyourSummaryPlanDescriptionandplandocuments.

• Documentcompliancewithclaimsprocedures

• Documentinvestmentselectionprocess.

• Documentcommunicationsprocessforfundselections/changes.

• Ensuretimelyexecutionofplandocuments(suchasamendments,serviceagreements,andtrustagreements).

Delegate and monitorFiduciary duties may be allocated among named fiduciaries and delegated to persons other than named fiduciaries, as long as the plan expressly provides prudent procedures for such allocation or delegations. By delegating, a fiduciary can shift the responsibility for discharging certain obligations under ERISA.

However a fiduciary has a duty to monitor the actions of those individuals to whom fiduciary responsibilities have been delegated

Comply with 404(c)A fiduciary is relieved from responsibility for a participant-directed investment only if the plan satisfies the conditions of Section 404(c) of ERISA. There are over 20 requirements to fully comply with 404(c). New York Life’s 404(c) Guide can assist you in complying.

Obtain fiduciary liability insuranceJust as you wouldn’t drive a car without having automobile insurance, you shouldn’t assume fiduciary responsibilities without having fiduciary liability insurance. Due to the complexities of federal regulations, it is entirely possible that a fiduciary can be found to have breached a fiduciary duty even if he or she acted in good faith and with the sole intention of furthering the interests of the plan, its participants and beneficiaries.

Do not confuse fiduciary liability insurance with a fidelity bond. A fidelity bond protects the plan in case of theft or fraud. If you are a fiduciary, fiduciary liability insurance may protect you in the event of a general fiduciary breach.

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©2010NewYorkLifeRetirementPlanServices,adivisionofNewYorkLifeInvestmentManagementLLC,690CantonStreet,Westwood,MA02090.

“NewYorkLifeInvestments”isaservicemarkusedbyNewYorkLifeInvestmentManagementHoldingsanditssubsidiary,NewYorkLifeInvestmentManagementLLC.

SecuritiesaredistributedbyNYLIFEDistributorsLLC,169LackawannaAvenueParsippany,NJ07054

www.nylim.com/retirement

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The information contained herein is general in nature and is provided solely for educational or informational purposes. Neither New York Life Investments nor its affiliates provide legal, accounting or tax advice. You should obtain advice specific to your own circumstances from your own legal, accounting and tax advisors.