5-13-26 Fiduciary Responsibility - The Janeanne Smith Interview

ERISA (1974) responded to high-profile pension failures (e.g., Studebaker Packard) and fostered the move to portable 401(k) accounts, which shifted significant retirement risk from employers to increasingly mobile employees—a structural change that leaves many small-business sponsors (~10–100 employees) exposed to plan operational and fiduciary challenges.

Small-plan sponsors often lack HR capacity and approach plan decisions personally rather than institutionally; crossing the ~100‑participant audit threshold can trigger five‑figure audit costs, making pooled employer plans (PEPs/MEPs) appealing for scale but creating tradeoffs in customization and suitability for high‑turnover or poorly tracked workforces.

ERISA fiduciary duty requires active vendor oversight, documented processes, and fee reviews, and sponsors must choose between advisory models that share liability (321) and discretionary models (338/330) that shift decision‑making to advisors—yet core administrative obligations (e.g., Form 5500) remain the sponsor's responsibility and carry IRS/DOL penalty risk if mishandled.

Notice distribution failures—especially losing track of terminated participants—and improper approval of distributions or loans are frequent compliance breach points driven by weak participant tracking and untimely actions, and they directly expose sponsors to fiduciary liability.