ERISA Tips: Basic Due Diligence for ERISA 403(b) Plans

By John Iekel • March 05, 2018 • 0 Comments
Editor’s Note: ERISA Tips is a feature provided with you in mind — to make the newsletter more useful to you! If you have any content for ERISA Tips or the 403(b) Advisor that you would like to contribute or suggest, please contact John Iekel, editor of the 403(b) Advisor, at jiekel@usaretirement.org.

This tip is taken from Diane Capone’s article “Basic Due Diligence Process for ERISA 403(b) Plans,” which originally ran on April 15, 2015.

Advisors working in the ERISA 403(b) marketplace are often asked to provide guidance and consulting services to plan sponsors to help them meet their fiduciary duties under ERISA. This enables advisors to add to their value with plan sponsors who so often know very little about the ERISA 403(b) plan that they have in place for their employees, and is true in particular for small non-profit 501(c)(3) organizations.

Section 403(b) plans of governmental employers, church-sponsored retirement plans and certain plans of 501(c)(3) organizations that have only elective deferral contributions and limited employer involvement are examples of retirement plans that are exempt from ERISA. Nonetheless, it is important for these plans to review, with their legal counsel, any fiduciary responsibilities they may have under state law. There can be benefit from having knowledge regarding ERISA and utilizing some of the provisions that would be beneficial to their plan.

Basic Areas for Review

Some basic areas it may be prudent to review in order to keep their retirement plan in compliance include:

  • Maintain an IRS-approved plan document and update as necessary for legislative changes.

  • Maintain an updated summary plan description which is provided to plan participants and includes information on the plan’s eligibility, contributions, distributions and other important aspects of the plan.

  • Review the plan provisions and verify that they are being handled properly in operation.

  • Ensure that the plan complies with the testing under the various Internal Revenue Code provisions.

  • Provide educational meetings for plan participants to discuss the plan, investment options and retirement readiness.

  • Provide plan participants with information as required by the DOL regarding plan investment options, investment returns, operating expense of the investments, fees that are charged to the participant and how the participant can get further information.

  • Maintain the proper ERISA fidelity bond (which is a mandatory requirement), and consider fiduciary liability insurance.

  • mplement a written investment policy for the plan and review it annually.

  • Maintain broad, well-diversified investment options with different risk/return potential that are reviewed at least annually with the plan investment committee to confirm that they still meet the investment policy statement guidelines.

  • Review the service provider fees associated with the plan and the plan’s investment options to confirm that they are reasonable for the services provided.


The plan fiduciary should work closely with their ERISA counsel and their plan service providers to verify that all of the various IRS and DOL requirements are being met. ERISA’s prudence standard for plan fiduciaries is not just that of a “prudent layperson,” but rather that of a prudent expert in retirement plan matters.

This can be accomplished through:

  • good plan procedures;

  • documentation of the administration and reporting requirements;

  • selection and monitoring of all service providers and selection; and

  • monitoring of investments in the plan.

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