ERISA Plans: Making Decisions and Monitoring Results

When you sponsor an ERISA-regulated retirement plan, it’s easy to get buried in compliance details and litigation risk management — and lose sight of what actually matters: making sound decisions and monitoring results. Here’s a closer look at what that really means in practice, because every participant in your plan is counting on you to get those decisions right — and better outcomes for everyone is what this is really all about.

Making Decisions

Sponsoring a retirement plan means making — and overseeing the execution of — decisions that put employees on a path to a secure retirement. Deciding and monitoring: those two responsibilities are the heart of your fiduciary obligation as an ERISA plan sponsor.

In real time, longer lifespans and a more expensive world are raising the stakes on each one of your decisions as a plan sponsor. Every dollar saved, invested, and spent within a retirement plan matters greatly. Strong participant engagement, sound investment choices, and real vigilance over fees are what separate a plan that works from one that just checks a box.

It’s wise to lean on great third-party providers for advice and administration, but you can’t hand off all of your responsibilities— the decisions, and the job of monitoring results remain yours. So how do you stay focused on decision quality and oversight as regulations shift and investment options multiply? Eric Dyson, Executive Director of 90 North Consulting and a widely recognized voice in ERISA fiduciary governance, offers a framework worth sitting with. In his LinkedIn article, “Eight Signature Principles of Thoughtful Fiduciary Leadership,” Dyson begins with four principles for thinking like a fiduciary when making difficult decisions: 

1.Before evaluating a solution, define the problem.

2.Prudence is about process. Loyalty is about purpose.

3.Examples should inform fiduciary judgment, never define it.

4.Checklists organize judgment. They never replace it.

As you use Dyson’s principles to reflect on the quality of your decision making on behalf of the 401k plan, you may find it helpful to examine the last decision you made. Did you grab at a “solution” that was proposed to you before actually examining and articulating the problem? Did you follow a clear process (prudence) toward making a decision to benefit the plan (loyalty)? As you leveraged solid examples, did you reach an independent judgement? 

If you conclude that you need to put more oomph into your decision making on behalf of the retirement plan, take heart—-you are not alone, and resources abound. Wondering where to start? Try taking a fresh look at this Department of Labor publication: Meeting Your Fiduciary Duties. 

Monitoring The Execution of Decisions: Governance

Well made decisions are meaningless if they are sloppily executed. That’s why, in addition to carrying the ultimate responsibility for decisions made about the plan, sponsors are also accountable for execution, and as Dyson reminds us, this is about having an effective committee and “governing like a fiduciary” by putting the remaining four principles of thoughtful fiduciary leadership front and center: 

5.Good governance provides flexibility within well-defined boundaries.

6.Good documentation records decisions. Great documentation explains the reasoning behind them.

7.Innovation is a means to an end. It is not the end itself.

8.Enduring fiduciary principles outlast changing regulations.

Investments May Not Perform As Expected…

Unfortunately, decisions made following a thorough fiduciary process don’t always turn out as planned (and plan sponsorship does not come with a magic wand). Even if nothing has been done wrong, complaints and questions can result in investigations and litigation under the high standards of ERISA. That’s why for plan sponsors, being defense ready with thorough documentation is essential, as Tamiko Toland, CEO of the 401(k) Annuity Hub, and Patrick Williams, co-founder of Fiduciary In A Box advise:

At the end of the day, any investment may not perform as expected or hoped, but that is not the standard to which plan sponsors are held. The introduction of new asset classes to the mix does not alter the fundamental procedures that plan sponsors use, though it does warrant new questions that reflect differences in the new asset classes….The strongest tool in the plan sponsor’s tool kit remains the same as it ever was: documentation of a prudent process that tracks both investment selection and ongoing monitoring. 

As private assets make their way toward retirement plans, Toland and Williams also encourage sponsors to beef up their prudent decision making efforts by specifically asking these five questions: 

1. How are the underlying instruments valued, and who performs the valuation?
2. How does liquidity factor into fund mechanics?
3. How is this investment benchmarked, and is that comparison appropriate?
4. What is the all-in cost, including any payments to the adviser or recordkeeper?
5. Has anything changed since our last review?

Important To Know: ERISA Defense Is An Out of Pocket Expense…

In the event of ERISA investigations or allegations, defense is an out of pocket expense for plan sponsors, and costs add up quickly, averaging $600—per hour. 

To ensure all retirement plan sponsors have protection, Colonial Surety Company offers an affordable Fiduciary+Cyber Liability Package that can be bundled with the Department of Labor’s required ERISA Fidelity Bond. (Remember, an ERISA Bond protects the retirement plan from losses due to theft or fraud—it does not protect a plan sponsor in the face of errors, oversights or allegations of a fiduciary breach.)

The Colonial Surety Company ERISA Bundle combines three essential protections in one seamless package:

• ERISA Fidelity Bond — Fulfills your federal mandate to protect plan assets from fraud and dishonesty
• Fiduciary Liability Insurance — Provides up to $1,000,000 in coverage for legal defense costs and penalties arising from fiduciary errors, administrative oversights, and participant claims
• Complimentary $50,000 Cyber Liability Insurance — Protects your plan and company against regulatory actions following a data breach, addressing the DOL’s cybersecurity guidance directly by including expert response services.

Colonial Surety Company is Treasury-Listed, rated “A” (Excellent) by AM Best, and has been in business since 1930. As a direct carrier — not a broker — there are no agent markups or unnecessary fees. You can quote, purchase, and download proof of coverage entirely online in minutes.

For a small business owner sponsoring a retirement plan, this bundle is the practical, affordable answer to a very real set of risks that most small and mid size plan sponsors are carrying unknowingly every single day.

Don’t wait for a participant complaint, DOL inquiry, or cyber threat to find out what you’re missing. 

Get an instant quote on Colonial Surety Company’s ERISA Bundle today — and protect your plan, your business, and your personal assets in one smart move.

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