Plan Fiduciary Responsibilities During the COVID-19 Pandemic
The Employee Retirement Income Security Act of 1974 (ERISA) requires that plan fiduciaries act with “care, skill, prudence, and diligence” when managing retirement plans. This includes acting only with the interests of participants and their beneficiaries in mind, keeping plan expenses to a reasonable level, following the terms of the plan’s governing documents, and ensuring that the plan’s investments are diversified. There is no question that the COVID-19 pandemic has presented a unique set of challenges for plan fiduciaries. However, plan fiduciaries should not expect audit relief from the IRS or DOL, nor should they expect relief from litigation risk. As a result, plan fiduciaries may want to identify the steps they have taken and the decisions they have made to adjust their processes in the face of the pandemic.
Following are several items to consider:
- Reach out to the plan’s service providers to verify the provider’s ability to handle, and adjust to, the economic and societal disruption(s) caused by the pandemic. This may include inquiries about the service provider’s business continuity plans, investment continuity, and/or delays in plan reporting.
- Review the plan’s investment lineup. During this time of uncertainty, it may be appropriate for plan fiduciaries to review the plan’s investments/funds to consider whether they remain prudent in the current market environment. It may also be a good time to execute more frequent or more detailed monitoring of the performance of the plan’s investments, especially if the markets experience further volatility.
- In defined contribution plans many participants are seeking long-term financial security. However, there may be participants (e.g., those nearing retirement) that are focused on the short term. Plan fiduciaries may wish to reach out to their consultants and other advisers to evaluate whether the investment options on the more conservative end of the lineup offer sufficient income preservation opportunities.
- Provide participant education/communication that is meaningful and helpful given the circumstances. If the markets continue to experience volatility, both the plan participants and the plan fiduciaries will benefit from an increased focus on educating participants to empower them to make decisions that best suit their investment and retirement goals.
- Continue to hold plan committee meetings and engage in an appropriate level of plan oversight. Committees may need to adjust their processes in light of the new virtual and work from home environments. More frequent meetings may also be necessary during this time of disruption and volatility.
- The pandemic may cause an increase in fraud-related activities due to economic disruption and an increase in electronic communications. Plan fiduciaries may want to evaluate the adequacy of the plan’s fraud protection mechanisms (i.e., those that protect participant information and participant assets). This could involve inquiring about the plan’s service providers and/or conducting a formal audit to evaluate how participant information is protected and what mechanisms exist to protect participants from identity theft and fraudulent benefit payouts.
Employers may be tempted to place their plan fiduciary duties on hold or even decide to discontinue their plan oversight responsibilities due to COVID-19. However, with the economic volatility and uncertainty that continue to affect plans, quality fiduciary oversight is needed now more than ever.
For more information about McKonly & Asbury’s Employee Benefit Plan services, or for questions regarding this article, please contact Stephanie Kramer, Manager with McKonly & Asbury, at skramer@macpas.com. And be sure to register for our upcoming webinar – Employee Benefit Plans Industry Update – taking place on Thursday, November 19 at 2:00 p.m. for more in-depth information on this topic. You can learn more and register by clicking here.