Another university ERISA lawsuit settles with monetary and non-monetary penalties. Columbia University agreed to a $13 million settlement along with several non-monetary terms. The non-monetary terms are of interest as they suggest best practices that should be considered by all plan sponsors, seeking to reduce fiduciary risk. These same terms have appeared in several other cases that have settled and include:
- Issuance of a request for proposal for recordkeeping and administrative services
- Annual training for the plan fiduciaries related to their ERISA responsibilities
- Informing current recordkeepers that they may not use plan data to sell non-plan products and services
- Informing participants of their ability to move assets out of frozen investment options
Request for Proposal - RFPs are not required but are, in many cases, the best way to determine the prices and services a particular plan can demand from the marketplace. Committees should periodically review and document discussions and decisions related to putting their plan’s recordkeeping services out to bid.
Annual Training – Plan fiduciaries should participate in ongoing training related to ERISA and their fiduciary duty to the plan and its participants. This can be overlooked by some committees, especially those with longer tenure and experience. However, education is critical to help fiduciaries understand their responsibilities and remain current on legal and regulatory information as well as plan design and investment option trends.
Plan Data – Recordkeeping costs have gone down significantly over the past several years. As a result, recordkeepers look to promote proprietary products and services (in and out of plan offerings) to generate additional revenue. Plan fiduciaries should inquire about their recordkeeper’s use of plan information to ensure it is not being leveraged improperly to sell additional products and services.
Legacy Contracts – 403(b) plans often hold investments in individual annuity contracts that limit the ability of the plan sponsor to move assets out of the contracts. For a plan with these individual contracts, plan fiduciaries should periodically inform participants in those contracts of these limitations and the individual's ability to move their investments from the legacy contract to institutionally controlled investment options.
Other college and university settlements have contained the same non-monetary requirements. Plan sponsors should consider applying these same standards to their plan(s) to ensure they are meeting their fiduciary responsibility.
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