401(k) Fiduciary Duties: A Practical Guide for CFOs

Start by identifying the plan’s fiduciaries

A person can become a fiduciary because of a title in the plan documents or because of the authority they exercise in practice. Individuals who select and monitor investments, appoint service providers, control plan assets, or make discretionary plan decisions may carry fiduciary responsibility even when “fiduciary” does not appear in their job title.

CFOs should maintain a current fiduciary map that identifies the plan sponsor, named fiduciaries, committee members, trustees, investment decision-makers, and any outside fiduciaries. The map should also distinguish fiduciary decisions from routine administrative tasks. Clear assignments reduce the risk that an important duty falls between roles.

The standard is a prudent process

ERISA generally requires plan fiduciaries to act solely in the interests of participants and beneficiaries, for the exclusive purpose of providing benefits and paying reasonable plan expenses. Fiduciaries are also expected to act with care, skill, prudence, and diligence; diversify plan investments when appropriate; and follow governing plan documents insofar as those documents are consistent with ERISA.

Prudence is evaluated through the decision-making process, not only the eventual result. Markets can decline after a thoughtful decision, while a favorable outcome does not cure a careless process. The practical objective is therefore a repeatable governance framework supported by relevant information, appropriate expertise, and contemporaneous records.

Monitor investments and fees on a regular cadence

Investment selection is not a one-time event. A committee should periodically review each option against appropriate benchmarks and the criteria in its investment policy statement. Performance matters, but so do risk, fees, management changes, investment style, and the role an option serves in the overall menu.

Plan fees require similar attention. Recordkeeping, advisory, investment, custody, audit, and other expenses should be understood and assessed for reasonableness in relation to the services received. Reasonable does not necessarily mean cheapest. The committee should be able to explain what the plan pays, who receives it, what services are provided, and why the arrangement remains appropriate.

• Review investment options against documented criteria and relevant benchmarks.
• Identify all direct and indirect compensation paid from plan assets.
• Benchmark fees periodically and whenever services or plan demographics change materially.
• Document the reasons for retaining, replacing, or placing an investment or provider on watch.

Delegate carefully, then monitor the delegation

Qualified specialists can strengthen governance and help a committee apply the appropriate level of expertise. Depending on the engagement, an advisor may serve in a 3(21) fiduciary capacity by providing advice, or a 3(38) investment manager may accept discretion over investment selection and monitoring.

Delegation can change the allocation of responsibilities, but it does not eliminate the sponsor’s obligation to prudently select and monitor the provider. CFOs should understand the exact scope of each engagement, confirm fiduciary status in writing, review conflicts and compensation, and periodically evaluate service quality and performance.

Build an audit-ready record

Good documentation shows that a prudent process occurred. Committee minutes should capture the materials reviewed, questions asked, advice received, decisions made, and rationale for those decisions. Records should be specific enough to reconstruct the process without becoming a transcript of every discussion.

A consistent document-retention practice should cover committee materials, fee disclosures, benchmarking reports, investment reviews, service agreements, participant disclosures, training records, and follow-up items. Assigning owners and deadlines to action items helps demonstrate that decisions were carried through rather than merely discussed.

A CFO’s fiduciary oversight checklist

This checklist is a starting point rather than a substitute for advice tailored to a particular plan. ERISA responsibilities depend on the plan documents, the services retained, and the authority exercised. Legal questions should be reviewed with qualified ERISA counsel.

• Confirm who holds each fiduciary and administrative responsibility.
• Keep committee charters, delegations, and plan documents current.
• Schedule regular meetings with a defined agenda and decision calendar.
• Review investments, fees, providers, participant outcomes, and operational issues.
• Require clear disclosure of compensation and potential conflicts of interest.
• Provide periodic fiduciary education for committee members.
• Track corrective actions through completion and preserve supporting records.

Governance that can withstand scrutiny

For CFOs, the strongest 401(k) fiduciary program is usually not the most complicated. It is the one that makes accountability visible, brings the right information to the right people, and produces a clear record of prudent oversight over time.

Old Slip Capital works with plan sponsors to clarify fiduciary responsibilities, evaluate investments and fees, and establish a disciplined review process. If your organization is assessing its current governance framework, we welcome a conversation.