Benefit Plan Administration: Resources and Simple Tips for Prudent Decision-Making
In the course of administering an employee benefit plan, lots of decisions must be made. Whether those decisions are being made by an individual or a committee, the process for making the decision must be prudent. Importantly, if the decision later is challenged by a participant by making an ERISA claim in federal court, how can the person or committee who made the decision demonstrate prudence?
Becoming informed is the first step in demonstrating prudence. The Employee Benefit Security Administration (EBSA), the federal agency in charge of compliance and enforcement for administrators of employee benefit plans, has a useful list of reader-friendly resources to help plan administrators with decisions and tasks such as:
▪Understanding the duties of a plan fiduciary
▪Purchasing group health insurance coverage
▪Selecting an auditor for an employee benefit plan
▪Selecting and monitoring pension plan investment consultants
▪Selecting and monitoring other types of plan service providers
▪Complying with COBRA
▪Complying with the reporting and disclosure requirements for benefit plans
▪Preparing the annual 550 report
▪Processing health and disability plan claims
▪Understanding and monitoring 401(k) plan fees and expenses
▪Understanding and monitoring target date funds as a plan investment option
These resources can be somewhat difficult to locate on the EBSA web site, but the entire collection can be found at https://www.dol.gov/agencies/ebsa/employers-and-advisers/small-business/publications.
Of course, it is one thing to make an informed prudent decision, and entirely another thing to prove in federal court, sometimes many years later, that your decision-making process was prudent. In ERISA cases, a federal judge (not a sympathetic jury) will determine whether the fiduciary’s conduct was prudent. The following key steps in any important fiduciary decision should be documented in writing, either in the form of a memo or committee meeting minutes.
▪Collect relevant information and seek assistance from an expert, if necessary.
▪Review the information and ask questions.
▪Discuss the information and the options presented in light of the best interests of the plan’s participants.
▪State the decision that was made and summarize the reasons, focusing on the best interests of the plan’s participants.
▪If “no change” was the decision made, summarize the reasons for maintaining the status quo.
A writing demonstrating these steps, created contemporaneously with the fiduciary’s decision, becomes powerful evidence in federal court that the fiduciary has acted prudently in making the decision. Particularly when a decision is being made by a group, memories of what happened during a committee meeting can fade and individuals may recall the events at the meeting differently. Memorializing the events of the meeting in the form of minutes and having the minutes approved by the group eliminates these potential problems down the road.
If you are faced with an important decision regarding your employee benefit plan, remember that the Employee Benefits lawyers of Koley Jessen can assist you. Whether it is a quick consultation by phone or email, in-person attendance at an important meeting, or reviewing and providing legal advice on insurance policies or third-party service provider contracts, we are here to serve you.