The US Department of Labor (DOL) has cut financial advisors some slack in getting ready to comply with its new fiduciary rule. But defined contribution (DC) plan sponsors don’t have the same luxury.

That’s because plan sponsors have been subject to Employee Retirement Income Security Act (ERISA) fiduciary rules since 1974, whether they know it or not. And based on the results of our latest survey, many don’t know it.

According to ERISA, fiduciary duty requires DC plan sponsors to comply with a set of core standards of conduct. These include:

  • Acting in the best interests of plan participants
  • Paying only necessary and reasonable expenses for administering the plan
  • Performing duties with the care, skill, prudence and diligence of a person knowledgeable in the field
  • Minimizing large investment losses by offering a diverse investment menu
  • Adhering to the terms of documents governing the plan
  • Avoiding any self-dealing or conflicts of interest

KNOWLEDGE IS POWER (IGNORANCE ISN’T BLISS)

Those fiduciary requirements may seem daunting, especially when plan sponsors have wider responsibilities in their company—or if they’re “just part of” an investment committee or plan administrative committee.

But all plan sponsors are on the hook for core standards of conduct. So it’s always a good time for everyone connected with the operation of their company’s DC plan to review the who and what of fiduciary responsibilities. It may also make sense to do it now, because more outside advisors and consultants will soon become fiduciaries, too.

There’s another timely reason: our latest survey, Inside the Minds of Plan Sponsors, indicates that too many plan sponsors don’t realize their fiduciary status—and the legal obligation it puts on them.

We surveyed more than 1,000 plan sponsors, all of whom qualified as fiduciaries through initial screening questions. However, when respondents were asked directly if they were fiduciaries, nearly half (49%) said no. Only 44% were certain of their fiduciary status, and roughly 6% said they didn’t know or weren’t sure. No one should be guessing about this, given their fiduciary status and responsibilities to the plan, to participants and even to their own personal liability.

There’s another cause for concern: fiduciary awareness is declining. In 2011, 61% of our respondents knew they were fiduciaries. So a drop to only 44%—17 percentage points lower—calls for a deeper look at how to make plan sponsors more aware.