The Responsibility of Plan Fiduciaries

Last Updated: March 17, 2017

Protecting against the Self-Interest of Others for the Good of Participants

Fiduciaries of the JP Morgan Chase 401(k) Savings Plan have recently been sued by Plan participants. Listed allegations include:
  • failing to monitor and evaluate the cost of investment options
  • imprudently allowing the Plan’s assets to remain in various proprietary (JPMorgan) investment vehicles rather than lower fee, similar investment vehicles, and
  • failing to remove fiduciaries whose performance was sub-par.[1]
Also specified as an allegation in the complaint was the failure to, “have an independent system of review in place to ensure that Plan participants were being charged appropriate and reasonable fees for both proprietary and non-proprietary investment options.”[2] Because the investment options were largely JP Morgan products, it was somewhat easier for the Plaintiffs to allege Plan Fiduciaries were not acting in the best interest of Plan Participants. Instead, they were acting in the best interest of the Plan Sponsor as the retirement plan was largely composed of JP Morgan products.
…your job as a fiduciary to ensure others are not promoting their own agenda above those of plan participants’.
Initially, the complaint filed against Fiduciaries of the JP Morgan Plan may seem removed from the typical plan fiduciaries who are not themselves in the recordkeeping business. However, such is not actually the case. The Complaint’s allegations have much in common with suits filed against plan sponsors in non-financial industry sectors. One example is the Complaint’s allegation of the failure to, “have an independent system of review in place to ensure that Plan participants were being charged appropriate and reasonable fees for both proprietary and non-proprietary investment options.”[3] Perhaps the most important take-away from this case for plan fiduciaries of all industries is that it is your job as a fiduciary to ensure others are not promoting their own agenda above those of plan participants’. In this particular case, the complaint alleged JP Morgan provided investment products that were advantageous to the plan sponsor and not in the best interest of participants.  For example, if a plan fiduciary failed to evaluate properly their plan record keeper’s recommendation to use their funds within the plan, the fiduciary in such an instance would be just as liable for not protecting the interests of participants, as are the fiduciaries in the recent JP Morgan case.  Who, then, can you trust to help you navigate the maze of retirement plan management? The answer is very often that it is appropriate to consult an outside, independent investment advisor[4] or manager[5].[6] Such an investment advisor or manager can work with the plan fiduciaries to develop an Investment Policy Statement to which fiduciaries can look in evaluating their investment lineup in a systematic and unbiased fashion. Using investment monitoring metrics set out in the investment policy statement, the advisor can provide written analyses with recommendations of whether to replace or retain funds.  If a fund receives a replacement recommendation, the investment advisor may provide a fund or funds with which you as the fiduciary may choose as the replacement if, indeed, a decision is made to replace. Decisions should be carefully analyzed and the analysis documented. If you use a 3(21) Investment Adviser wherein the adviser is a co-fiduciary, your fiduciary-committee members will maintain the responsibility of voting on whether to replace or retain, and provide documentation, with the help of your investment advisor. Documentation should be made accordingly, and you investment advisor will likely be able to help you with that. If you use a 3(38) Investment Manager, the same documentation should be made with regard to the Investment Policy Statement, performance evaluations, and decision documentation.  However, because in a 3(38) relationship, the advisor becomes the investment manager, your Committee’s responsibility is limited to overseeing your investment advisor. This oversight is to ensure the delegation to your advisor as the investment manager continues to be an appropriate one. The world of retirement plan management is complex. Plan fiduciaries and plan sponsors typically prefer to focus on their own core competencies in their given industry. This enables them to have the most thriving business possible while still providing their employees with the best retirement possible. At Pension Consultants, we can help you manage your retirement plan so you can focus on the business of being you! If you have questions or would like assistance, please contact our ERISA Services team today at (417) 889-4918.
The information provided in this document is not intended to be legal advice. Neither Pension Consultants, Inc. nor any of its employees engage in the practice of law. If assistance is needed in making legal determinations, counsel in the appropriate jurisdiction should be retained, and Pension Consultants may continue to provide consulting services if needed.
[1] Paragraph 195 of Complaint [2] Paragraph 79 of Complaint [3] Paragraph 79 of Complaint [4] See 29 U.S. Code §1102 [5] See 29 U.S. Code §1102 [6] See 29 U.S. Code §1105 (c) –
PCI’s archived blog entries are dated, the rules and statutes referenced may have changed. The analysis or guidance within these blog entries may have become stale, dated, or no longer accurate. PCI will not update or change these entries to reflect the latest analysis or development.


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