When people hear the words fiduciary breach, they tend to think about something dramatic. Maybe an investment scandal. Maybe excessive fees. Maybe somebody stealing plan assets.
Most plan sponsor problems are a lot less exciting.
They come from indifference.
The plan committee hasn’t met in two years. Nobody has reviewed the investment lineup. The payroll process has never been checked. The plan document sits in a folder that nobody reads. Participants complain about problems, but everyone assumes the recordkeeper will handle them.
That is how little problems become big ones.
ERISA does not require plan sponsors to be perfect. It does require them to act prudently. Prudence is a process. It means paying attention, asking questions, documenting decisions, and following up when something does not look right.
Too many sponsors treat the 401(k) plan as something that runs in the background. They hired a TPA. They hired an adviser. They hired a recordkeeper. They assume those providers are watching everything.
That is a dangerous assumption.
Providers can help administer the plan, but they cannot replace the sponsor’s responsibility to oversee it. If the sponsor never asks questions, never reviews reports, and never checks whether procedures are actually being followed, problems can sit unnoticed for years.
The biggest fiduciary risk may not be greed or bad intentions. It may simply be neglect.
Most sponsors care about their employees and want to run a good plan. The problem is that good intentions are not a compliance procedure.
The best protection is not complicated. Pay attention. Meet regularly. Review the plan. Ask questions. Document what you do.
Indifference is easy.
Unfortunately, correcting the problems it creates usually is not.