What is a Fiduciary Risk Assessment? Plan sponsors who are concerned about fiduciary breaches can conduct a Fiduciary Risk Assessment to determine the level of exposure and if it is necessary to undergo an in-depth evaluation.

The Fiduciary Risk Assessment process steps plan sponsors through a series of questions and then issues a report on the health of the plan and when applicable, changes or next steps. In cases where there are significant deficiencies a further in-depth evaluation may be suggested.

What is a Fiduciary Breach? Many 401(k) plans may be at risk for failing to prudently act in the best interest of the plan’s participants. The most frequent of these failures, known as fiduciary breaches are:

• A fund line-up that underperforms or is high cost without the procedural prudence of regular reviews. Every plan must perform regular reviews.
• Advising a plan sponsor on establishment or change to a fund line-up without the procedural prudence of selecting the adviser and selecting the investments. Adviser selection and investment selection must be documented.
• Advising a participant of which investments to select without the protection afforded by the Fiduciary Adviser safe harbor. Helpful verbal advice to a participant is unprotected and makes adviser liable if losses are incurred.
• Failing to ensure that every participant has sufficient information to make informed decisions without a qualified default investment alternative (QDIA). Enrollment meetings and educational materials offer no protection from participants claiming they had insufficient information.
• Errors in processing participants’ requests without a qualified automatic enrollment arrangement (QACA). Manual enrollment creates exposure to errors.
• Failure to make required disclosures. There is no protection for this failure.