ERISA fiduciary · personal liability · documented process is the only defense
Retirement plans & fiduciary responsibility
ERISA imposes personal liability on plan fiduciaries — including the senior HR people who sit on investment and admin committees. Documented process is the only real defense, and the SPHR exam reliably tests fiduciary scope by name.
Four ERISA fiduciary duties
duty 01 · LOYALTY
Participant interest only
Decisions made for the exclusive benefit of plan participants and beneficiaries. No self-dealing — using plan funds for company benefit is a prohibited transaction.
duty 02 · PRUDENCE
Expert care standard
The “prudent expert” rule — act with the care a knowledgeable person familiar with such matters would use. Engage advisors when the committee lacks expertise.
duty 03 · DIVERSIFY
Minimize risk of large loss
Plan investments diversified across asset classes to reduce concentration risk. Heavy employer-stock concentration (Enron-era pattern) is a fiduciary failure.
duty 04 · FOLLOW THE PLAN
Operate within plan terms
The plan document is the constitution. Fiduciaries operate within its terms; deviations are breaches. Documented committee meetings, vote records, and rationale create the defense.
behavioral economics, deployed at scale
Auto-enroll. Auto-escalate. Make opt-out the friction.
Plans that switch from opt-in to opt-out see participation jump from ~60% to 95%+. Adding annual auto-escalation pushes contribution rates from default 3% toward 10%+ over time. SECURE Act 2.0 (2022) makes auto-enrollment mandatory for most new plans — the exam tests this.
Committee structure is the defense
Senior HR establishes an investment committee (selects funds, monitors performance, replaces underperformers) and an administrative committee(handles claims appeals, plan operations, participant communications). Both have documented charters, fiduciary training, regular meetings, and minutes. Fiduciary insurance and D&O coverage are non-optional. Form 5500 plus an independent audit annually for plans over 100 participants.
Exam Traps
Fiduciary duty is personal liability
Plan fiduciaries personally liable for breach. Senior HR understands fiduciary scope and ensures D&O + fiduciary insurance.
Investment committee separation
Investment decisions delegated to committee with documented charter and fiduciary training. Senior HR establishes committee.
SECURE 2.0 changes coverage
SECURE Act 2.0 (2022) requires auto-enrollment for new plans, expanded coverage for part-time. Senior HR tracks compliance.
Form 5500 + audit are annual
Plans over 100 participants require independent audit + 5500 filing. Senior HR maintains calendar.
Self-dealing voids plan
Using plan funds for company benefit is prohibited transaction. Senior HR maintains strict separation.
Auto-enroll + auto-escalate
Behavioral defaults dramatically increase participation and savings. Senior HR makes opt-out the friction, not opt-in.
Written plan document, summary plan description, summary annual report.
Investment committee + admin committee with documented duties.
Auto-enroll, auto-escalate, employer match. Compliance with §401(k).
Annual investment review. Fund replacement when warranted. Documented decisions.
Vesting schedule, distribution rules, RMD age. Lifetime benefit.
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