The Ins and Outs of Fiduciary Responsibilities

Robert J. Rafter, Esq.Educator

The Retirement Learning Center

The Ins and Outs of Fiduciary Responsibilities

Fiduciaries By law, every plan must have at least one fiduciary. That

person must adhere to ERISA’s standards of conduct.

A panel of experts will discuss fiduciary fundamentals such as:

▪ Diversifying the investment fund lineup

▪ Monitoring performance and benchmarking fees

▪ Selecting members for the investment committee

▪ Crafting an investment policy statement

▪ Determining fiduciary responsibilities post retirement

▪ Monitoring advisor non-investment risk

.

Are you a designated fiduciary of your plan?

1. Yes

2. No

THANK YOU TO OUR SPONSOR

What is the biggest concern when it comes to

fiduciary responsibilities?

1. Knowing and understanding the current rules that

impact fiduciaries

2. Mitigating litigation risk

3. Determining the reasonableness of fees

THANK YOU TO OUR SPONSOR

Debra L Roberts, MBA CPADirector of Finance

Maryland Supplemental Retirement Plans(MSRP)

Plan Sponsor State of MD Supplemental Retirement Plans

TOTAL DC ASSETS

$4.23B

NUMBER OF

PARTICIPANTS

69,250

ABOUT PLAN

The most significant aspect of our Plans

is the investment authority we have to

directly negotiate with our investment

managers. This shift has allowed us to

significantly reduce fees and change

fund managers more efficiently.

George EvansCo-President

Convergence, Inc.

Non - Investment Risk Continues in the Market

❑ MADOFF-2008 4 Types of Risk Measured at the Advisor

❑ EVERGREEN-2009

❑ ALLADIN-2012 OPERATIONAL

❑ ABRAAJ-2017 COMPLIANCE

❑ TALIMCO-2019 REGULATORY EVENT

❑ CANNELL 2020 VENDOR

Prior to the actions taken against the 6 ADVISORS above - Convergence rated

the non-investment risk profile of each HIGH

Sophisticated Risk Layer added to ODD DDQ and Site Visits

Non – Investment Risk versus the Market

35%

62%

3%

27%

51%

22%

0%

10%

20%

30%

40%

50%

60%

70%

High Medium Low

Non-Investment Risk Rating vs Market

Plan X Market

Richard J. Phelan, CFP®, CEBS, CPCSenior ERISA Consultant, Strategic

Retirement ConsultingVanguard

Sean T. Hannah, Ph.DWake Forest University

Distinguished Professor and Tylee Wilson Chair, School of Business,

Colonel (Retired) US Army

The future of fiduciary is not fiduciary…

Behavioral Governance is the study of the

interrelationships between leadership,

stewardship, and governance.

It’s based on the groundbreaking research

in Neuro-leadership.

Beyond fiduciary compliance - requires

purpose, passion and competence.

Get involved: The Behavioral Governance

Society (3ethos.com).

GOVERNANCE

Critical Neurological Capacities

Behavioral Governance Framework © 3ethos

Money

Market

Bond/

Stable

Value

Growth

Employer

Stock

Int’l

Brokerage

Account

Cash

Bank

Mutual

Fund

Insurance

Company

Investment

Manager

Sep. Acct.

Stock

Exchange

Trust

Recordkeeper

Plan

Trustee

Participant

Records

Payroll

Provider

Participants

Benefits

Committee

Board of Directors

Comp. Committee

CEO

Treasury HR/Bnfts

Consultants

Communications

Appoints Trustee

Hires

Consultants

Selects

Recordkeeper

Appoints

Investment

Mgrs.

Typical Fiduciary Structure & Delegations

Selects

Investment

Line-up

Participant Deferrals

and Employer Contributions

Cash

Deferral &

Investment

Elections

Plan Sponsor

Plan

Distributions

Manages company stock fund;

liquidity; proxy voting; trades

VRU, Internet

Telephone Reps.

Participant

Statements

Investment AdviceParticipant

Advice

❑ Annual review of fiduciary appointments

❑ Training – fiduciaries/benefits committee

❑ Annual review of written investment policy

❑ Quarterly review of investment performance

❑ Periodic Investment Committee meetings

❑ Documentation of all processes

❑ Fiduciary Audit File

Fiduciary Risk ManagementPrudence is a Matter of Process

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