When it comes to fiduciary awareness, what DC plan executives don't know can hurt them, their plans and their participants.
Recent surveys and observations by defined contribution experts highlight troubling gaps in executives' understanding of their fiduciary duties — fundamental weaknesses that reduce operational efficiency and increase risks of ERISA lawsuits.
"They don't realize they are fiduciaries," said Nevin Adams, chief content officer for the American Retirement Association, Arlington, Va., describing several of the greatest dangers for executives. "They don't realize they have personal liability."
Another danger is the executives' belief they can dodge fiduciary responsibility by outsourcing the role to a third party. "You can limit it and mitigate it, but you cannot eliminate it," Mr. Adams said.
The biggest hurdle for executives, is understanding their fiduciary responsibilities.
AllianceBernstein LP, New York, asked more than 1,000 DC executives if they were fiduciaries, finding that 6% didn't know and 49% didn't consider themselves fiduciaries. That was a trick question: All respondents were fiduciaries, based on their duties, said Jennifer DeLong, a managing director and head of defined contribution.
"We were surprised by the results," said Ms. DeLong, adding the findings of the survey weren't skewed by plan size. For example, 48% of respondents from plans with $500 million or more in assets mistakenly believed they weren't fiduciaries, she said.
The survey cited four types of fiduciaries: people having primary responsibility for their DC plans; people making "all decisions" for the plan; members of the investment committee choosing or monitoring investment choices; or members of the plan's administrative committee.