Hey Joel! Answers From a Former Practicing ERISA Attorney, Fiduciary Review

Do you have a question for an ERISA attorney burning in your heart? This forum features answers to some of the most common plan sponsor questions from all over the country, written by a former practicing ERISA attorney.

Should I distribute the Fiduciary Investment Review to plan participants?
– Generous in Georgia

Dear Generous in Georgia,
I appreciate your desire to provide detailed information to your plan participants, but hold your horses. While there is nothing legally preventing the sharing of the Fiduciary Investment Review (FIR) with participants, we do not recommend it and, in fact, strongly discourage it. The FIR is designed for delivery to fiduciaries, not participants. This is not only because the fiduciaries are more sophisticated but because the report is better understood (I would even say, only understood) when presented/explained by an advisor that knows the data.

The average participant may be alarmed by watchlisted funds and take inappropriate action (i.e., remove them from his/her portfolio when that’s not the recommendation.) Further, we fear that participants will move all their money into the funds scoring 9 or 10 as you can imagine, doing so would ignore the critical strategy of diversification. Instead of sharing the report itself, I always recommend an employee communication from the plan sponsor. Something like – “Hey employees, the company has met with our plan advisor to review the plan investments and all is doing great.

We take the monitoring seriously; we do it regularly and will let you know when/if a change is needed… Until then, don’t forget to join, increase your deferral, diversify, etc, etc.” No need to alarm unnecessarily.

Always here to give advice,

Joel ShapiroJD, LLM
Former Practicing ERISA Attorney

For more information on any of the topics addressed in this month’s newsletter, please contact Patrick Zumbusch or Deirdre Kochanski at Wellspring Financial Partners.