Fiduciary Requirements Fiduciary Responsibilities

The Pension Protection Act of 2006, if its requirements are met, provides plan sponsors with fiduciary responsibility protection from offering investment advice. Both the plan sponsor and fiduciary advisor have certain requirements to meet.

The fiduciary advisor must provide written notice to the plan participant(s) of the following:

• Disclosure of any investment affiliates.
• The types of services provided by the fiduciary advisor.
• Acknowledgement that the fiduciary advisor is a fiduciary.
• All compensation received by the fiduciary advisor and its affiliates.
• Historical rates of returns of investment options.
• The participant has right to obtain advice from another advisor.
• A privacy statement or policy in regard to participant data.

The fiduciary advisor must also satisfy the following additional requirements:

• The fiduciary advisor must provide applicable disclosures under securities laws.
• All transactions must be authorized by plan participants.
• Fiduciary advisor compensation must be reasonable.
• The terms of an investment transaction must be at least as favorable to the plan as an arm's-length transaction would be.

In terms of disclosure, the fiduciary advisor must:

• Maintain disclosure data in an accurate form.
• Provide accurate, free disclosure information to participants no less frequently than annually.
• Provide accurate, free information upon request from a participant.
• Provide accurate, free information concerning any material change to disclosure information.

 

 

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