Prudent Process For Administering Your Benefit Plans

Fee disclosure rules issued recently by the Department of Labor signal that it is time for plan sponsors and responsible plan fiduciaries to review and update their processes for selecting and monitoring plan service providers and the investment options offered under their plans. ERISA Section 408(b)(2) provides that a contract between a plan and its service provider is not a prohibited transaction if the contract is reasonable and only reasonable compensation is paid for services. The goal then of the process is for the responsible plan fiduciary to be able to assess the reasonableness of the compensation paid for services and the conflicts of interest that may affect a service provider's performance of services. By instituting and documenting its processes, a plan fiduciary should be able to demonstrate that it acted prudently when selecting a service provider for its 401(k) or other retirement plan.