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Connecticut CPA
September/October 2017
efined contribution plan fiducia-
ries responsibilities, have, since
the 1974 Employee Retirement
Income Security Act (ERISA), included
specified duties. Under ERISA, the
five duties are: the duty of loyalty, the
duty of prudence, the duty to diversify
investments, the duty to follow plan
documents, and the duty to avoid pro-
hibited transactions. These duties are
applied to fiduciaries whether or not
they are expressly named as such.
Pitfalls for the Unwary CFO
The listed ERISA duties appear
straightforward and well within the
normal scope of a CPA's professional
mindset. However, times change, and
so have best practices under the five
fiduciary duties.
Precipitated by news accounts of a na-
tionwide retirement savings shortfall,
regulatory compliance best practices,
and fear of lawsuits
, what qualifies as
acceptable implementation of ERISA
duties is now far more robust than it
was 1974. Greater emphasis and ac-
countability is now placed on plan fi-
duciaries for participant outcomes.
Today, two developments one demo-
graphic and the other regulatory are
combining to again expand the inter-
pretation of, and benchmarks for, fidel-
ity to these duties.
Demographic Shift from Active
Participants to In-Plan Retirees
Demographically, it's no secret the
Monty Python generation is silly-walk-
ing itself in the general direction of re-
tirement through the side streets of our
careers to the ministry of Social Secu-
rity. On average, about 11,000 Baby
Boomers per day 4 million per year
are expected to retire through 2030.
Subsequently, plan fiduciaries must
broaden both their analysis of risk and
their attention to outcomes for all par-
ticipants including in-plan retirees.
Although the interests of active partici-
pants and in-plan retirees often align,
earlier plan emphasis on a glide path
to retirement for active participants
must now also accommodate a new
emphasis on a glide path through
retirement for in-plan retirees. We
are in large part in uncharted terri-
tory, as Baby Boomers are the first
generation to use defined contribution
plans as their primary retirement sav-
ings vehicle.
With retirement, the definition of posi-
tive participant outcomes expands.
Throughout the years of active par-
ticipation, participant outcomes are
based on a theoretical standard of
living, during a theoretical retirement,
helped or hurt by theoretical market re-
turns. Once retirees begin withdrawals,
however, the theoretical becomes ex-
tant, and those participant outcomes
and continuing decisions made during
retirement will define the retirees' stan-
dard of living.
Regulatory Change
Public Policy and the Fiduciary Rule
The new Department of Labor (DOL)
Fiduciary Rule became effective on
June 9, 2017, with full implementation
required by January 1, 2018. The rule
elevates the responsibilities of financial
advisors, whether their advice is to in-
dividuals (including IRA owners) or to
a plan, to be on par with many of the
responsibilities controlling ERISA plan
ERISA's Five
Fiduciary Duties

The duty of loyalty.
The duty of prudence.
The duty to diversify investments.
The duty to follow plan documents.
The duty to avoid prohibited
The Finance Executive's
Changing Responsibilities for
Defined Contribution Plans
By Julie McNeal, CPA, CTCPA Director of Finance and Operations
Interestingly, a listing of the largest settlements of 401(k) fee cases in the July 14, 2017 Wall Street Journal article "Latest Wave of 401(k) Suits Yields
Big Wins, and Big Losses, for Plaintiffs" compared 17 companies, eight of which were financial services companies. "Many of the latest suits target
companies, including a number of financial services firms, for using their own investments in retirement plans," said author Anne Tergesen.