Plan trustees have a vested interest in providing effective education and communication to each plan participant because they (trustees) are responsible for every participant’s asset allocation as if the trustees had made the selection for the participant. That is unless the plan meets the Safe Harbor requirements of a 404(c) plan.
Another area of concern for plan trustees is the issue of giving investment advice versus providing investment education. The Department of Labor clearly defines the difference between advice and education which is set forth in ERISA’s interpretive bulletin 96-1; Participant Investment Education; Final Rule. Providing specific advice to participants increases potential fiduciary liability. It is our opinion that investment advice should not be given to participants unless the investment advisor acknowledges their fiduciary status in writing for this function. We have found several cases where specific advice has been provided to plan participants without anyone knowing that the line had been crossed.
Premier Financial Group has specifically designed its participant education and communication program to be aligned with the guidelines set forth in ERISA interpretive bulletin 96-1. Premier’s education program centers on the use of professionally designed and monitored passively-managed structured asset class funds.
Due to the trustees personal responsibilities stated above, the use of model portfolios is extremely beneficial. This is due to the process utilized to design and monitor these portfolios. These model portfolios offer broad diversification that is in complete alignment with the duty of diversification under ERISA section 404(a)(1). The participants’ use of model portfolios increases their likelihood of achieving a successful investment experience and, in our opinion, reduces trustee liability.
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