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Clark: Innovate, But Remember Fiduciary Duty

Thinking outside the box can result in plan features that offer flexibility, liquidity and portability. But a recently released white paper suggests that it is important to be mindful of fiduciary duties while embracing innovation.

In a Franklin Templeton Investments white paper, “Fiduciary Implications of Flexible Retirement Income Solutions,” Wagner Law Group Partner Thomas W. Clark, Jr. argues that such retirement income solutions “used on their own, or in combination with other retirement income investment solutions, can efficiently target specific goals while potentially preserving needed liquidity, portability and flexibility.” But at the same time, he notes, fiduciary roles and responsibilities while evaluating, choosing and overseeing such plan features and options “may not be well understood.

“Defined contribution plan sponsors that add retirement income features to their plans are not taking on the same liabilities associated with sponsoring a DB plan,” says Clark, adding that “the contingent liability of accumulating assets sufficient to fund retirement remains” with the participant, even if features are added to the plan.

The scope and extent of the variety of options a plan offers “translate to equally varied income needs,” says Clark. And he suggests that flexibility is a plus, arguing that “rigid and all-too-restrictive retirement income solutions can struggle to accommodate these varied participant needs.”

Against this backdrop, Clark notes, are ERISA fiduciary duties that remain and still must be met. Accomplishing that, the paper says, “can be straightforward and reasonable if done properly and in the best interest of the employee plan participants.” He adds that selecting and monitoring retirement income investment solutions entails special considerations, but that essentially the process “is largely consistent with current best practice.”

To assist in meeting those responsibilities while evaluating, selecting and overseeing retirement income investment solutions, Clark provides ideas for a fiduciary checklist that can be used in order to ensure ERISA compliance. He also answers questions a plan sponsor, service provider and employer may have concerning such plan features.


Clark suggests that the checklist include the following elements.

  • Document the entire process.

  • Identify the proper individuals who have fiduciary responsibility to lead the selection process and investment solutions based an analysis of plan participants’ needs.

  • Consider a full range of retirement income solutions that help in addressing retired participants’ needs.

  • Evaluate the long-term security of the retirement income investment solution and the costs associated with those solutions.

  • Review the plan documents to see if any adjustments are necessary.

  • Address changes to investment policy statements.

  • Pay careful attention to the portability of retirement income solutions.

  • Establish a comprehensive, clear plan for communication with employees, as well as a regular, prudent process for monitoring a particular plan feature.


Clark also offers answers to several questions a plan sponsor and provider may have in considering the addition of features that offer flexibility, liquidity and portability. These include:

  • Why are employers considering retirement income investment solutions for their DC plans?

  • Is offering retirement income investment solutions within a DC plan an obligation under ERISA?

  • What are the potential benefits for the employer and employees?

  • Once the decision has been made to make retirement income investment solutions available within a DC plan, what are the fiduciary obligations that must be met by the employer?

Bigger Picture

“Plan fiduciaries must maintain a thorough and documented process for the selection and ongoing monitoring of plan investment options,” cautions Clark. “Beyond the simple satisfaction of core ERISA fiduciary standards, employers seeking to maximize the broader value of retirement income solutions for their participants will often choose to weigh other factors and needs.” He adds that offering flexible options “opens opportunity to a wider set of retirement income investment solutions that may also offer greater flexibility — used either alone or in concert — to address the varying needs of plan participants, especially during the unknowns of the transition into early retirement.”