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Putnam Retirement Services
Fiduciaryplanningguide
 
PART I:
THE BASICS
Who is a “fiduciary?”......................................................................................................................2What are the roles and responsibilities of a fiduciary? .....................................................4The role of investment education and advice ......................................................................9ERISA section 404(c) ..................................................................................................................10Prohibited transaction rules ......................................................................................................12
PART II:
FOCUS ON INVESTMENTS
A general perspective on fiduciary responsibility for investments .............................13Investment lineups........................................................................................................................14
PART III:
BEST PRACTICES IN MANAGING FIDUCIARY LIABILITY
Identifying fiduciaries and assigning roles and responsibilities ...................................17Establishing investment and administrative committees................................................17Establishing operating procedures for the committees...................................................19Investment policy statements ..................................................................................................19Identifying and using outside experts ...................................................................................21Selecting and monitoring plan service providers...............................................................21Fees and disclosures to sponsors and participants..........................................................22Establishing procedures for transmission of employee contributions......................24Satisfying ERISA bonding requirements .............................................................................24Obtaining fiduciary liability insurance ..................................................................................25
PART IV:
APPENDICES
Appendix I: Sample minutes of Trustees meetings...........................................................27Appendix II: Compliance calendar..........................................................................................28
 
TheEmployeeRetirementIncomeSecurityActof1974(“ERISA”) provided plan sponsors and companies withguidelines for offering tax-deferred retirement plans.But over the past decade, there has been an increasedfocus on fiduciary responsibility. Why? The 401(k)plan — originally designed as a supplemental plan topension or other employer-funded plans — has nowbecome the primary retirement savings vehicle formost Americans. In 2007, Defined Contribution assetstotaled over $4.1 trillion, most of which is invested inour nation’s financial markets. This system offerstremendous choice and flexibility — with which comesa need for oversight by fiduciaries and education forparticipants. In 2006, the Pension Protection Act rec-ognized gaps in both the Defined Benefit and DefinedContribution systems and provided some clarity, butfurther heightened the responsibilities of the fiduciary.Increasingly, lawyers are bringing lawsuits on behalfof plan participants against fiduciaries — including thecompany executives responsible for running 401(k)plans — suing to recover losses incurred by 401(k) planparticipants. And right behind the private litigators areagents from the Department of Labor, state and localagencies, as well as the media.Not surprisingly, these events have drawn the focus ofmany plan sponsors toward issues of fiduciary respon-sibility and the need to reduce risk in this area. Althoughthe increased attention on fiduciary issues has creatednew complexity for plan sponsors, the end result issalutary and long overdue. At Putnam, we believe thatplan sponsors should make an active commitment totheir role as plan fiduciary.The Putnam approach does not seek to
minimize
exposure absolutely through an attempt to avoidfiduciary responsibility. Rather, fiduciaries reduce riskby
managing
their role and thus sponsor a plan thatprovides the highest likelihood that participants willachieve their goals.To make this active commitment possible, you musthave both an appreciation of the roles and responsi-bilities of a fiduciary and an understanding of thepractical steps you can take to fulfill them. This guideis designed as a primer for understanding the issuesfacing plan sponsors as fiduciaries, and providespractical solutions to the most common challenges.The guide is supplemented by a number of specifictools, including a Fiduciary Responsibility Checklist,a sampleInvestment Policy Statement and Checklist,and an ERISA Section 404(c) Checklist.This guide is only a starting point. Professionals atPutnam and its industry partners have a wealth ofexperience in dealing with fiduciary issues and, in theirrole as administrative services providers to your plan,are in a unique position to assist you. In short, ourapproach is designed to help you embrace yourresponsibilities as a fiduciary, while managing risk.
This guide has been prepared for clients of Putnamfor informational purposes only. The summaries oflegal matters or recommendations for action aregeneral in nature and are not intended to provideauthoritative guidance or legal advice. You shouldconsult your own attorney, consultant, or financial orother advisor for guidance on your plan and yourcompany’s particular situation.
The new focus on fiduciary responsibility
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