Fiduciary responsibilities for your retirement plan should be taken very seriously.  A fiduciary can be held personally liable for any losses the plan incurs that are the result of a breach of the plan's fiduciary responsibility.  There are generally two types of fiduciaries:  A named fiduciary, someone who is named in the plan document, or appointed by the plan sponsor; a functional fiduciary, someone who acts in a fiduciary capacity based on their job duties or responsibilities with respect to the plan. 

A recent class action lawsuit for breach of fiduciary duties and excessive plan expenses may raise some concerns for benefit plan fiduciaries. Under ERISA, a fiduciary is held to a "prudent man" standard of care.  The failure to balance the relevant factors and make a reasoned decision as a prudent fiduciary maybe considered a breach of fiduciary duty.

In a recent case, Gerald George v. Kraft Foods Global, Inc. (2011, CA7) 2011 WL 1345463, a group of plan participants claim that the fiduciaries did not provide a remedy to a particular investment which caused it to underperform. The plan participants also claimed that the fees paid to a third party record-keeper were excessive.  The case was returned to the district court for further consideration after the Seventh Circuit reversed portions of the district court's findings in favor of the plan participants.

This is just one recent example of a potential breach of fiduciary responsibility. This type of case is becoming more and more common.  Fiduciaries need to fully understand their responsibilities and execute them accordingly to avoid potentially costly litigation.

For further discussion on Fiduciary responsibility and its impact on you and your plan, please feel free to call Jennifer Shepard, CPA, Director of Employee Benefit Plans at 973-472-6250 or jshepard@smf-cpa.com