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Meeting Fiduciary Duties: Don’t Forget Plan Documents

A recent blog post argues that it is wise for plan fiduciaries to be aware of the importance of plan documents in meeting their fiduciary duties.

In “Those Pesky Plan Documents…What Do They Have To Do With my Fiduciary Duties?” an article in a recent Boutwell Fay, LLP newsletter, Deborah Fabricant posits that what she calls the “sleeper” duty of plan fiduciaries to follow the terms of written plan documents can “catch even the most seemingly prudent and loyal fiduciary by surprise,” but at their peril. “Knowing and following governing plan documents is a big deal for plan fiduciaries,” writes Fabricant.

Letting that duty fall through the cracks, Fabricant warns, could expose plan fiduciaries to legal or regulatory action by the Department of Labor (DOL) and/or action by private parties. And, she reminds, it is important to keep in mind that passing muster with the IRS does not translate to doing so with DOL rules — keeping in compliance with IRS regulations and obeying ERISA and the regulations under it are not the same thing. “Fiduciary liability is governed by ERISA, not the Code,” she writes, noting that “even where the IRS passes off on a plan correction under EPCRS, the DOL (or a court, in response to a lawsuit by the DOL or a private litigant)” still could require plan fiduciaries to restore losses and profits to a plan under ERISA.

Fabricant pays special attention to ERISA Section 404(a)(1)(D). She notes that it “requires a fiduciary to discharge his duties solely in the interest of the plan’s participants and beneficiaries, in accordance with the documents and instruments governing the plan” insofar as they are consistent with ERISA. This duty, she says, centers on two duties:

1. knowing and following the terms of the governing plan documents; and
2. reviewing the governing plan documents to make sure they are in compliance with ERISA.

Fabricant offers plan fiduciaries some tips to help them make sure they are meeting their plan document-related duties:

Identify governing plan documents.
Asking the following questions, she suggests, can help with identifying which documents actually govern the plan.

  • Which documents are the current plan documents?

  • Are plan amendments that have never been signed governing plan documents?

  • Will other documents be considered plan documents for purposes of ERISA Section 414(a)(1)(D)?

Review governing plan documents to make sure they comply with ERISA.

Consider plan document content. “Plan fiduciaries should seriously consider whether the old adage ‘the less you say the better’ might apply to plan documents,” Fabricant writes. Not doing so, she warns, can “box a fiduciary into the four corners of the plan document” and could impose unnecessary hardship on the fiduciaries in meeting their duties.

“Keeping an eye on Section 404(a)(1)(D) plan document duties when drafting and reviewing plan documents may prevent fiduciary headaches down the road,” Fabricant notes.