Step 3 Toward Fiduciary Wellness: Fiduciary Education & Training          

The need for your trustees and committee members to receive fiduciary education and training is quite apparent when we take a step back and consider their day-to-day responsibilities that commonly take precedence over their management of your retirement plan. These individuals may be running your company, managing its finances, determining budgets, analyzing production and sales numbers, or focusing on maximizing margin. They may be managing a work crew, sales force, or production unit. They come in early, stay late, work on weekends, travel, and have enough responsibility and company pride that they definitely take their work home with them.

With all of that in mind, many do not have the time, energy, bandwidth, or interest in understanding the intricacies of the retirement plan industry and their fiduciary duties. As we referenced last week in Step 1 of this process, are your fiduciaries familiar with share classes, revenue sharing, proprietary funds, collective investment trusts, to vs. through glidepaths, managed accounts, and revenue equalization?

DOL: Need for Education. The Department of Labor raised a lot of eyebrows a few years ago when it began to ask, during the audit process, whether plan trustees had received fiduciary training. In some instances, it asked for proof, including copies of materials. Many plan trustees could not provide the desired answer. After all, nothing in ERISA requires fiduciary training. Yet it became apparent that the DOL thinks it to be important.

Procedural & Substantive Value. Following the DOL’s expression of interest in fiduciary training, it became apparent that your trustees could receive procedural and substantive value through training. The procedural aspect would situate you to answer the DOL’s inquiry in the affirmative. It feels better to tell the DOL, “Yes, we have, and here are the materials”, than to answer “No.”

But the substantive value is of greater importance. How can we ask your employees to serve as plan trustees, to accept fiduciary responsibility, and to put their personal assets at risk, without clearly explaining those responsibilities, helping them to understand ERISA’s standards, and giving them the tools to understand the fulfillment of those responsibilities? The failure to do so is simply not right. Your trustees not only need the training and education, they deserve it.

Fiduciary Education Curriculum. We recommend that your trustees and committee members receive their training in several phases as a part of an ongoing process. It should start with a “fiduciary fundamentals” course that gives them ERISA’s nuts and bolts. It defines their core responsibilities and applies those to the processes currently in place. The next step should include ongoing education that helps them to proactively learn about regulatory initiatives, litigation filings, and industry hot topics. This may occur through newsletters, blogs, or, best yet, within your trustee reviews. Finally, when you add a new trustee or committee member, we recommend keeping in mind that they should be brought up to speed by receiving the same information the others have already received.

Closing Thoughts. Please focus on one key statement from above: your trustees not only need the education, they deserve it. You’re asking them to accept an important responsibility and to assume potentially significant personal financial risk. Be sure they have the tools to fulfill that responsibility and to best manage that risk.

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