Under ERISA, the federal law that regulates retirement and 401(k) plans, plan fiduciaries are required to prudently administer the plan, select and monitor plan investments and sufficiently diversify plan assets to minimize the risk of large losses. When third parties are retained to assist with these duties, they may become co-fiduciaries, but the employer retains fiduciary oversight responsibility to monitor the selection and performance of plan service providers and investment advisors.
COVID-19 has presented many challenges, including market volatility and business disruptions, which have placed added pressures on plan fiduciaries to comply with their ongoing obligations to prudently administer plans and plan investments. COVID-19 does not suspend or reduce fiduciary obligations; rather, given the uncertainties and concerns faced by employers and employees regarding the effects of the economic downturn and the security of their retirement plan savings, plan fiduciary responsibilities arguably are increased. Since ERISA fiduciaries face potential personal liability for breaches of their responsibility, it is essential that they be able to demonstrate their compliance with fiduciary standards and best practices to successfully withstand any fiduciary duty challenges by participants, the Department of Labor or the IRS.
The following steps are provided to help employers and ERISA fiduciaries demonstrate prudence in plan operation and management and to mitigate their legal risk in response to the COVID-19 environment.