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An ERISA Foundation Q&A Part 2
Last Updated: November 14, 2011
After our recent Educational Series webinar on An ERISA Foundation: Laying the Groundwork for Successful Fiduciary Oversight, Chase Tweel, J.D., LL.M., a Pension Consultants ERISA Analyst responded to the questions the audience asked. There were so many great questions that we’ve broken the Q&A into two sections. Here’s “Part 2” of what he had to say.
Question: Can you give me some examples of what a settlor function is?
Chase: A settlor function is one that is distinct from a fiduciary function. In other words, it’s a decision or a function that’s performed “above the plan,” and is not subject to fiduciary scrutiny because it’s a decision or an act that’s being made while the employer and the individuals who represent the employer are wearing their corporate hats. Some settler function examples include the decision to execute a merger, sell the company or acquire another company. Even though that decision is going to profoundly impact the retirement plan, the decision is still insulated from a business fiduciary standard.
So if a merger or acquisition has an incidental adverse impact to plan participants, plan participants would not be able to bring a cause of action against the employer or the plan sponsor for that merger or business transaction because the act was performed as a settlor, not as a fiduciary.
Other examples of settlor functions would be tweaking the design of the plan, removing certain benefits and features, adding a Roth feature and eliminating a match. As long as certain requirements are met because of their settlor functions, there’s not going to be fiduciary exposure for those actions.
Question: How do I know if my trustee is directed or discretionary?
Chase: This should be a relatively easy issue to determine. The first place to look is in the trustee provision of the plan. If it’s not exclusively stated there, it will be in the trustee agreement.
Question: Does paying for postage to mail out the plan summary constitute a reasonable plan expense?
Chase: Yes. I believe that would constitute a reasonable plan expense in nearly every instance. Unfortunately, though, with other types of items, it’s not always a clear cut issue. There are no tests to determine whether something is a reasonable plan expense or not; however, the DOL provides expense guidance, mostly through advisory opinions. They provide hypothetical examples that constitute reasonable plan expenses. I believe your example would safely fall into the reasonable plan expense category.
Question: Have there been any changes to the Pension Protection Act of 2006? If so, what are the tasks that a plan sponsor needs to do?
Chase: The PPA was the most recent comprehensive amendment to ERISA. There have been amendments since, some of which have expounded upon changes that were first brought on by PPA. The HEART Amendment and the WRERA Amendment may sound familiar to many plan sponsors. Each one of those amendments have introduced a multitude of changes, some of which deal with topics that are both addressed and not addressed by PPA.
The applicability of those topics to certain retirement plans is going to depend on the nature of the plan itself. But a big part of what we do on a daily basis is to review a plan’s historical records and maintain administrative document manuals. That involves reviewing recent legislative amendments including HEART, WRERA and others.
Based on the changes since PPA was introduced in 2006, plan sponsors first need to make sure the plans have adopted the new amendments and second, they need to make sure that they’re administering their plans in accordance with these provisions. This is a big initiative for us and an important part of what we do on a daily basis.
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