Benefit Plan Risks Need Managing, Too
Business Insurance Online (06/03/02) Vol. 36, No. 22 p.10; Duran, Nicole

The Employee Retirement Income Security Act of 1974 is a set of process-oriented regulations that companies need to follow implicitly from decision-making to what decisions have been made and why. Courts and regulators, according to the act, have to recreate the situation in which fiduciary decisions were made to determine whether the decision made at the time was prudent and reasonable. However, in order for the right decision to be made, board members must defer to senior management officials concerning recommended plan designs, which are often garnered from retirement plan experts. Once a plan design is chosen, individuals with the appropriate skills should be chosen to execute the plan in a fair and prudent manner in order to achieve company and participant goals. Board of directors members should compare the performance of their investment managers to benchmark indices. Moreover, each decision made should be well-documented and should follow set policy guidelines. Each benefits plan should be subjected to periodic reviews to realign them with performance objectives.

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