Good housekeeping is an essential part of good plan governance. If a plan sponsor’s documents and governance structure were in a metaphorical closet, a closer peek inside might reveal that what plan sponsors are (or are not) doing could be putting their companies at risk.
The standards of fiduciary conduct for retirement and welfare plans are generally set forth in the Employee Retirement Income Security Act of 1974, as amended (ERISA). ERISA distinguishes between a plan’s fiduciary functions, which are subject to ERISA, and settlor functions, which are not. Fiduciary functions include exercising discretionary authority with respect to a plan’s management or administration, whereas settlor functions relate to a plan’s design, amendment, and termination. Although a person is allowed to wear “two hats” with respect to a plan (serving in both a settlor and fiduciary capacity), ERISA requires that these overlapping roles be kept separate and distinct.