Erisa Plans and Service Provider Due Diligence: Going Beyond the Background Check
Fiduciary Leadership, LLC
July 10, 2012
Retirement plan sponsors in charge of $17 trillion have a choice. They can rely on luck or use discipline to properly discharge their fiduciary duties. The former may seem easy, but the costs of poor oversight easily outweigh the benefits of a ‘‘fingers crossed’’ approach.
Regulators have made it clear that the initial selection of a service provider, such as a custodial bank, thirdparty administrator, or asset manager to an Employee Retirement Income Security Act plan, is just the beginning. Plan sponsors need to monitor vendors on an ongoing basis. Besides verifying that fees being paid to an outside party continue to be reasonable and that contract performance is satisfactory, ERISA plan decisionmakers need to regularly sit down with their service providers, auditors, and compliance team to verify whether each organization has established — and is following — protective internal controls in key areas such as hiring, trading, and cash management.
Keywords: ERISA, retirement, pension, asset manager, hedge fund manager, private equity fund manager, derivatives, risk, custodial bank
JEL Classification: G23, K00, K22, K23, K41, L84, N20working papers series
Date posted: August 10, 2012
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