What is 3(16) Fiduciary?
ERISA Section 3(16) provides for a fiduciary* who is appointed and accepts fiduciary responsibility for certain otherwise administrative functions for the Plan. The duties and responsibilities of a 3(16) fiduciary include reporting and disclosure as well as setting up and monitoring “Best Practices” for the Plan. Policies and procedures are the steps followed to operate a retirement plan – for example, the process for approving a Financial Hardship or a Loan. Documenting Plan policies and procedures is very important to ensure consistent operations. Established policies and procedures must be followed in order for the Plan to be eligible to self-correct many plan errors under the IRS plan correction programs. Internal controls are policies and procedures designed to help detect and prevent errors. Strong internal controls are important to provide a reasonable level of assurance that the plan is operating properly.
Best Practices implemented by QBI Fiduciary Administration 3(16) fiduciary, include:
- Review of Plan Document (update, restatement, execution) and Procedures and coordination with Employee Handbook
- Procedures for distribution of Summary Plan Description and Plan Notices, including 404(c) Notice
- Authorizing Financial Hardship distributions and Plan Loans and Rollovers
- Oversight of appointment of required Plan functionaries and other fiduciaries, such as Plan Trustee, Plan Committee
- Review of key government audit “trigger points” such as implementation of the correct definition of compensation; timely deposit of plan contributions; use of valid eligibility and plan entry dates
- Review of Record keeper stored plan provisions, timely investment of contributions received, processes for researching defective participant address information
- Review of timely testing procedures and responses to failed tests, audit, fiduciary bond and completion and filing of the 5500.
- Providing a Fiduciary Administration Controls and Reporting detailed summary at each Plan Year end.
*A fiduciary must act solely in the best interests and for the exclusive benefit of plan participants and beneficiaries. A fiduciary must comply with all plan documents and all applicable federal and state laws and regulations. This mandates familiarity with these documents and laws. A fiduciary has a duty to seek the advice of experts and must act with the care, skill and diligence that would be exercised by a reasonably prudent expert. The Plan Sponsor retains certain responsibilities, including oversight of QBI Fiduciary Administration and the Plan’s other Service Providers and fiduciaries. QBI Fiduciary Administration responsibilities do not include the monitoring of Plan investments or the pricing of investment or recordkeeping packages chosen for the Plan. QBI Fiduciary Administration's services, pricing and terms of operation are governed by the Engagement Agreement executed for each specific Plan.