Ann Combs, assistant secretary of the Department of Labor (DOL), recently reiterated that "...it is important to remember that [the Employee Retirement Income Security Act] ERISA requires that fiduciaries discharge their duties prudently."

It's a broad statement for an Act with very broad, and sometimes not always very well understood, regulations. But the statement holds a lot of weight given the liabilities facing plan sponsors today.

ERISA was mandated in 1974 in order to protect the retirement assets of Americans. By implementing rules that qualified plans must follow, the regulations attempt to ensure that fiduciaries do not misuse plan assets. However, due to the number of regulations and the complexities of many of them, there is often confusion among the plan sponsors and a general lack of awareness of the liabilities that exist. In fact, depending on the infraction, fiduciaries can be held personally liable and sued for personal assets.

Many retirement plan fiduciaries are more concerned than ever about their personal liability due to a number of factors in today's marketplace. Issues like the volatility in the stock and bond market, pension law reform, corporate and mutual fund malfeasance, retirement vendors exiting the business, mutual fund consolidations, an increase in ERISA civil suits and a greater scrutiny of retirement plans by the DOL all come to mind. Combine these issues with a looming crisis of inadequate retirement savings by plan participants, and the potential threat to fiduciaries is considerable.

Chris Reagan, managing director, Investment Advisory, worries that fiduciaries at mid-market corporations may wear so many hats that 401(k) plan decisions may get lost in the shuffle. He cautions that plan sponsors cannot be lulled into a false confidence just because they have retained a large, well known retirement plan vendor who they believe has their best interest at heart. Retirement plan vendors generally cannot advise plan sponsors due to the inherent conflicts of interest and the inclusion of proprietary mutual funds in the program.

"The bottom line is that fiduciaries must make decisions in the best interest of plan participants. They must be able to demonstrate that they have done so by maintaining and documenting their process. They are required to be an expert on all issues relating to the retirement plan or retain specialists to help them." That's where Chris generally steps in. Chris focuses on helping his clients establish and maintain a prudent investment process for their 401(k) plans, so that they can focus on the other issues constantly landing on their desks.

"Our role is to help clients manage their liability by establishing a process for appropriate investment practices, monitoring investments and providing on-going due diligence. We get involved in writing investment policy statements, asset allocation and diversification studies, manager and vendor searches, fee analysis and participant education. Our role and responsibilities are clearly aligned with the plan sponsor by acting in their best interest and not that of the vendors."

The end result will create a stronger retirement plan with a documented process helping the plan sponsor reduce their liability, create a better benefit for participants leaving fiduciaries more time to focus on their business.