Fiduciary IQ Low? Maybe A Quiz Could Help


Guardian Life is offering a quiz for employers to take, to help them get a better grasp on their fiduciary responsibilities in their firms’ retirement plans.

That’s a pretty good idea, considering that according to Guardian’s own research, not all employers are clear about their fiduciary roles.

In fact, nearly one-third of plan sponsors that Guardian polled late last year said they did not even realize that they were a plan fiduciary.

In the same Guardian survey, 32 percent of “small” plan sponsors (a key market for insurance agents) were found to have poor fiduciary awareness and 31 percent only had average awareness. Just 37 percent of the small plan sponsors were considered to have excellent fiduciary awareness.

Granted, taking a quiz will not create full understanding. But it’s a start to awareness and may spark further inquiry — voluntarily, no less. That awareness can open the door to risk mitigation discussions that lead to solutions, with benefits for all concerned.

By contrast, if the employers who are in the dark about the responsibilities they already have stay that way, they could end up making decisions and taking actions that invite legal liability problems later on.

Yes, benefit advisors and various providers who serve the plans could have, should have and probably did, inform their employer clients about their fiduciary responsibilities. There are even third-party firms that, for a price, will take on much of responsibility. But that doesn’t mean all employers (plan sponsors) know they are fiduciaries or what it means. Small employers are especially challenged in this area due to limited time and staff resources.

Here’s an interesting side note. Guardian’s announcement came out shortly after the Government Accountability Office (GAO) released its mega-report on managed accounts inside of 401(k) and other defined contribution retirement plans. That report addresses many issues, one of which is relevant here. This is a finding that some types of managed account arrangements are operating under certain fiduciary requirements that others are not.

Taken together, the Guardian survey and the GAO reports suggest that the concept — and/or reality —of fiduciary responsibility within plans is not as widely grasped or as consistent as some of us may have assumed.

Guardian responded to its findings by creating an easy way for plan sponsors to get a refresher on fiduciary responsibilities. (Advisors can help by pointing their clients to the Guardian Fiduciary Awareness Quiz.) GAO responded to its own findings by asking the Department of Labor to look into the matter of fiduciary requirements regarding managed accounts.

The Guardian initiative is a private sector response. The GAO recommendation points to a regulatoryresponse. The former may result in more employer awareness/interest in addressing the responsibility. The latter may result in more government guidance for employers. The former could have a fairly immediate impact on enhanced understanding (assuming employers take the quiz). The latter could take some time to have an impact.

Matthew Bryan, Guardian’s director of retirement marketing, rightly pointed out that it is “important” that plan sponsors appropriately mitigate their fiduciary risk, no matter the size of their plans.

That’s not going to happen if employers have limited or no awareness of their fiduciary responsibility — or of the associated risk. It’s nice to see some efforts to fix that are under way.



Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Connect with Linda →

  • Livin_Large

    It would be interesting to see a list of regulatory actions or litigation resulting from Fiduciary noncompliance. Nothing like see an execution to instill respect for the law.

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