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Case Study: Upholding Your Fiduciary Duty

Sydnie Weller - Tuesday, October 01, 2019


A breach of fiduciary duty involving a 401(k)-plan inspired Ullico to publish tips on how to uphold duties as a trustee. A fiduciary duty is the legal obligation to act in the best interest of another party. A trustee owes a fiduciary duty to the fund’s participants. Ullico spelled out methods to prevent breaching a fiduciary duty in a case study published this Summer from the Ullico Bulletin publication. 

According to the case study, having “a well-documented prudent process to review and oversee fund investment options and third-party providers” is the most valuable line of defense. Regular meetings should be held between the trustees and third-party providers to review investment options and to ensure the fund is being ran to the benchmark standards. Fees should also be reviewed to make sure they line up with the benchmarks.  

Offering “a diversified mix of investments” also allows participants to decide on investments based on their risk appetite. Trustees still need to be cautious of their fiduciary duty. 

Practice number three is to “ensure that they are following statutory requirements with respect to fund disclosures.”  Participants need to be aware of the risk they are taking part in. Should a claim be filed, the court will recognize that the participant was aware of the risk.  

The fourth practice is to “have outside counsel conduct fiduciary training.” Training can prevent a lawsuit all together—trustees will be aware of acts that do not uphold their fiduciary duty.  The training will also help fix issues before they turn into problems.  

The last practice involves “out-sourcing fiduciary management of investments to independent fiduciary professionals.” This option takes the control away from the trustees. Taking investment decisions away from the trustees and giving them to a third party requires great consideration and review.  
  
It is beneficial to review your fund’s procedures and strategies. Keeping trustees and participants up to date with what is happening within the fund decreases the probability of a lawsuit.  

Click here to read the full case study by Ullico Casualty Group. 


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