1. ACCE Benefit Trust Spring Meeting
Fiduciary Training
ACCE Benefit Trust Spring Meeting
May 18, 2018
David C. Kaleda, Principal

2. Governance Overview
Benefits Trust is the sponsor of the Association of Chamber of Commerce Executives Profit Sharing Plan
BT, through its Board, runs the Plan
The Board Members -
act in a settlor, non-fiduciary capacity in some respects; and
act in a fiduciary capacity in other respects

3. “Settlor” vs. Fiduciary Activities
It is important to understand the distinction between “settlor” and fiduciary activities.
Importantly, when acting as a settlor, ERISA’s fiduciary standards do not apply.
“Settlor” activities (e.g., employer business decisions relating to plan establishment and design) are not fiduciary activities.
But plan assets cannot be used to pay for “settlor” activities.

4. “Settlor” vs. Fiduciary Activities
On the other hand, fiduciary activities include –
Appointing and monitoring other plan fiduciaries (including investment managers and investment advisors).
Selecting and monitoring service providers (TPAs, insurers, consultants).
Making claims decisions.
Paying plan expenses.
Plan investment decisions.
Plan assets can be used to pay for fiduciary activities.

5. Definition of “Fiduciary”
A person is a “fiduciary” to a plan to the extent that person –
Has any authority or control over the management of plan assets,
Has discretionary authority over plan administration, OR
Renders investment advice to the plan for a fee.
“Named Fiduciaries”
ERISA also requires that every plan have a “named fiduciary,” which means that certain fiduciaries must be identified (or identifiable pursuant to a procedure described) in the plan document.

6. Definition of “Fiduciary”
The definition is “functional”
This means that you can be a fiduciary regardless of whether you’re identified as a fiduciary in any document or whether you accept fiduciary status.
Your conduct—not your official role or duties—determine whether you are a fiduciary.

7. Settlor vs. Fiduciary Activities
The BT engages in the following settlor & fiduciary activities
Settlor/Non-fiduciary
Decisions regarding whether to offer a plan and to whom.
Decisions regarding plan design (types of contributions, types of distributions/loans, etc.).
Termination of Plan.
Fiduciary
Operation/administration of a plan.
Selection of investment options available to participants.
Hiring of service providers (FBI, Principal, HR Investment Consultants, BKD, Groom, etc.).
Using plan assets to pay for expenses.

8. ERISA Overview
ERISA governs the operation and administration of private pension and welfare benefit plans.
ERISA includes –
Fiduciary Responsibility Provisions
Liability & Enforcement Provisions
Reporting & Disclosure Rules

9. ERISA Overview Fiduciary Responsibility Administrative Requirements
ERISA imposes the “highest” fiduciary duty under law.
This standard is supplemented by ERISA’s prohibited transaction rules.
Administrative Requirements
ERISA has a number of rules regarding reporting and disclosure, plan documentation and governance, claims procedures, and rules governing custody and control of “plan assets.”
Liability and Enforcement
ERISA has an extensive liability and enforcement regime, which includes personal liability of fiduciaries, as well as co-fiduciary liability.

10. Who is a Fiduciary? Plan administrator.
Administrative and investment committees.
Trustee.
Investment managers and investment advisors.
Claims decision-makers.
Functional fiduciaries: Anyone who exercises discretion over plan investments or administration.

11. Who is a Fiduciary of the Plan?
Board members.
Principal as directed trustee.
Principal as discretionary trustee to collective investment trusts (but, not mutual funds)
Principal as investment manager of the Plan’s collective investment trusts.
HR Investment Consultants as investment advisor to the Committee

12. Who is not a fiduciary to the Plan?
FBI/ACCE
Marketing
Third party administration
Vendor relations support
Principal – recordkeeper
Groom Law – attorney
BKD – CPA/auditor
Advisers to Mutual Funds

13. Overview of Fiduciary Duties
ERISA § 404 requires fiduciaries to —
Act prudently;
Act solely in the interest of the plan’s participants and beneficiaries (duty of loyalty);
Use plan assets only to pay plan participants and beneficiaries and “reasonable” plan expenses;
Diversify plan investments to avoid large losses; and
Comply with governing plan documents.

14. Participant Directed Plans
“Safe Harbor” Relief under ERISA § 404(c)
ERISA limits fiduciary liability for plans that permit participant direction for investment decisions.
But the requirements of ERISA § 404(c) must be met.
Among other things –
Broad range of investment alternatives must be offered.
Participants must have the opportunity to exercise control over their accounts.
Required disclosures must be made.
Sufficient information about investments, including fees.
Notice that plan is intended to meet 404(c) requirements and that fiduciary liability is limited.

15. Fiduciary Duties - Prudence
Process, process, process . . .
Fiduciaries are not required to guarantee successful results—rather, they must employ a prudent decision-making process.
A prudent procedure is one employed by a “prudent expert” and not a “prudent layman.”
It is necessary to document procedural prudence.

16. Fiduciary Duties - Prudence
Identify the necessary information.
Obtain information from a reliable source.
Consult with experts, as necessary.
Document underlying basis for decision.
Make Informed decision

17. Fiduciary Duties - Loyalty
ERISA requires fiduciaries to act solely in the interest of participants and beneficiaries.
But Board members may “wear two hats.”
Employer “settlor” hat.
Fiduciary hat.

18. Fiduciary Duties – Prohibited Transactions
ERISA’s general fiduciary provisions are supplemented by “prohibited transaction” rules.
ERISA and the Code prohibit certain transactions between a plan and “parties in interest” and “disqualified persons” to the plan.
These include fiduciaries, the plan sponsor, service providers, and certain of their affiliates.
ERISA prohibits self-dealing and other certain transactions involving fiduciary conflicts.
But ERISA provides certain statutory exemptions and allows administrative exemptions to overcome these prohibitions.

19. Fiduciary Duties – Services and Fees
Decisions about the disposition of plan assets, including whether to pay expenses are “fiduciary.”
Fiduciaries may only pay “reasonable” plan expenses –
For services that are appropriate and helpful to the plan, e.g., administrative/investment expenses (but not for settlor expenses).
But fees must be “reasonable” in amount (compared to fees charged by other providers of similar services).
Reimbursement of reasonable fiduciary expenses (e.g., travel, meetings) is permitted.

20. Liability and Enforcement
Remember –
A fiduciary that breaches any of his/her fiduciary duties may be personally liable for plan losses.
A fiduciary may be liable for a breach of fiduciary duty by another fiduciary (“co-fiduciary”).
ERISA allows fiduciaries, participants, beneficiaries and the DOL authority to sue for violations of ERISA.
Participants can sue for benefit claims and equitable relief.
ERISA also provides for civil money penalties as well as criminal penalties.
ERISA generally preempts state lawsuits.

21. Key Areas of Compliance
Use of Plan Assets
Payments from BT bank account
Not plan assets
May be used to pay for settlor, fiduciary, administrative activities, & other services necessary to the operation of the Plan
Payments from PRA established at Principal
Treated as plan assets
May be used for fiduciary, administrative services, & other services necessary to the operation of the Plan

22. Key Areas of Compliance
Payment of Plan Expenses
Amounts paid from PRA must be “reasonable” in amount for services “necessary” to the operation and administration of the Plan
PRA used to pay –
FBI/ACCE – administrative services
HR Investment Consultants – advisory services
Trust Administrators LLC – administrative services
BKD – audit fees
Board – travel expenses
PRA cannot be used to pay settlor expenses – marketing, amendment of plan, etc.

23. Key Areas of Compliance
Selection and retention of service providers
Selection & retention of investment options and investment managers

24. Checklist of Key Fiduciary Issues
Oversight Responsibilities
Monitor investments, including fees and performance.
Consider types of investments used (e.g., mutual fund share class, collective investment funds, separately managed accounts, fund of funds).
Consider special issues for target date funds, default investments (QDIA), stable value funds, and fund substitutions/eliminations.
Monitor service providers (e.g., trustee, recordkeeper, investment consultant), including fees and performance.
Stay apprised of and continually monitor other plan expenses.
Fiduciary Process
Board members should be selected based on relevant expertise and availability, and should be formally appointed.
Board should meet regularly and minutes should be prepared to document discussions and decisions.
Board records should be maintained and readily accessible.
Board should have access to outside experts (e.g., investment advisors, legal counsel), as necessary.
Proper delegations should be made when allocating/delegating fiduciary responsibility.
General Plan Operation
Plan governing documents should be up-to-date (e.g., SPDs).
Plan governing documents should be consistent with each other and avoid conflicts.
Process should be consistent with documentation.
Required disclosures and filings should be made (e.g., participant disclosures, Form 5500s).

25. Questions?
David C. Kaleda (202)