Reducing Risk of Litigation Against Fiduciaries

by | Jan 19, 2021 | Employee Benefit Plans, PKF Texas - The Entrepreneur's Playbook®, Tax and Accounting Desk

Jen: This is The PKF Texas – Entrepreneur’s Playbook®. I’m Jen Lemanski, and I’m here with Kristin Ryan, an Audit Senior Manager and one of the faces of the PKF Texas Employee Benefit Plan Team. Kristin, welcome back to The Playbook.

Kristin: Thanks. Good to be back.

Jen: So, in the past, we’ve talked about fiduciaries, risk, that kind of thing, and I’ve heard that there’s been some litigation against fiduciaries. What kind of issues are you seeing in this space right now?

Kristin: Yeah, absolutely. So, the main issue that we see is there are people that are in fiduciary positions that are just not prepared to be in that position so they’ve kind of fallen into it, and there’s a lack of fiduciary education, so they’re really not sure what their responsibilities are supposed to be. And so, that’s part of our job is to help educate them. And the lawsuits primarily are around fees and operational errors.

Jen: That seems like it could cause some problems. What do you guys typically see?

Kristin: Yeah, absolutely. So, most of the lawsuits are around fees related to investments, but also service providers. So, dealing with fiduciaries’ responsibilities around choosing service providers and ensuring that those providers are still meeting the needs of the plan specifically. And so, the errors that I spoke of are, there’s a lot of them that we see, but the key one that we see is eligible compensation. And I know we’ve talked about that in other sessions, and we do seminars on that because it’s just such a big issue that we see. So, it relates to the compensation that’s being used to calculate the employees’ deferral and match.

Jen: Are there any kind of tools or things that fiduciaries can use to reduce their risk?

Kristin: Yeah, absolutely. We have one of our clients to thank for that, actually. They asked us for a checklist and it was specifically related to fiduciaries and fraud, but then we kind of took it a step further and developed one that goes over best practices and controls they can put in place to try to prevent some of that, and not just fraud related, but those errors that I spoke of. Anyone involved in plan administration, really, or oversight in a fiduciary role, would benefit from using the checklist, so we’re going to make that available to all of our viewers today.

Jen: Kristin, thanks for being here today, and we get you back to talk a little bit more about this soon.

Kristin: Sounds great.

Jen: This has been another thought leader production brought to you by PKF Texas – The Entrepreneurs Playbook®. For more information on this topic, visit Tune in next week for another chapter.


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