Stone Hill Fiduciary Management is an independent ERISA fiduciary compensated for our services from the plan sponsor, not by the custodian, trustee, or mutual fund company investing plan assets.
Plan fiduciaries cannot rely on a non-fiduciary service provider with conflicts of interest to accept responsibility for their service model and investment fund recommendations.
Many plan sponsors have relied upon non-fiduciary service providers for investment selection and fiduciary guidance in the absence of a fiduciary overlay service or discretionary vendor, resulting in significant damages and overall failure in monitoring record keeping costs, negotiating rebates, and selecting prudent investment options.
Courts continue to emphasize the importance of implementing and adhering to a deliberative process and focusing on the merits of employer decisions affecting plan participants.
Insurance carriers issuing fiduciary liability insurance policies continue to emphasize the importance of plan governance, including asset-based recordkeeping fee pricing concessions, low investment fund expenses, imprudent fund replacement and committee meeting minutes, to reduce the risk of a successful fiduciary breach claim.
Recordkeeping Fees: Committees must monitor fees and revenue sharing and demonstrate that decisions are in the best interest of plan participants. Service providers may not retain revenue sharing that exceeds the value of plan services.
Fee Offsets: Committees must negotiate mutual fund revenue sharing offsets with service providers to reduce the cost of providing administrative services to plan participants. Committees must use their purchasing power to reduce plan fees by leveraging their superior plan profile. As an alternative to fee offsets, committees should consider fee equalization, also referred to as fee leveling, and charge recordkeeping fees and advisor fees directly to participant accounts.
Selection of Investments: Committees must document the process of evaluating alternative investment funds. Committees may not delete a good-performing fund or use an alternative share class to create more revenue sharing simply to offset fees.
Corporate Services: Committees must avoid the payment of fees that exceed the market costs for plan services in order to subsidize corporate services, including payroll processing, welfare benefit plan, and defined benefit plan services.
Float Income: Float, or the income and interest earned when contributions and disbursements are held temporarily during the transfer process, constitutes plan assets and, therefore, must be allocated only among 401(k) plan participant accounts.
Fiduciary Monitoring Criteria: Employers must review custody statements monthly, compare manager performance quarterly, evaluate service provider quality annually, and formally scrutinize service provider contract capabilities, services, and fees triennially. ERISA fee litigation cases emphasize that plan sponsors must follow processes and act only in the best interest of the plan and for the exclusive benefit of participants.
Stone Hill Fiduciary Management does not have custody of client plan assets. Rather, we assist plan sponsor clients in the selection of a custodian and corporate trustee, who send monthly account statements and annual trust reports directly to plan sponsor clients. Stone Hill Fiduciary Management carefully reviews these custodial statements and trust reports on behalf of our clients.