Living with Fiduciary Responsibilities

July 5, 2006 ( - CHICAGO - While retirement plans with company stock as an investment option risk a plethora of potential regulatory problems for a plan sponsor, that does not necessarily mean plans should not offer it, a financial services attorney recently asserted.

Mark Niziak, a lawyer, and managing director of New York Life Investment Management, told those attending a discussion panel session on plan fiduciary issues at PLANSPONSOR’s Plan Designs 2006 conference that sponsors owed participants the same responsibility of care with company stock as any other investment alternative.

For example, Niziak suggested that plan sponsors:

  • Remove all trading restrictions on company stock,
  • Avoid paying a company matching contribution in shares of company stock, and
  • Institute a company stock cap so a participant can not overload on stock shares.

“Once you’re sued,” Niziak told attendees, “it’s going to be easy to prove that you did these things. You have to do the same due diligence as you would with any other investment in the plan.”

Michael Weddell, a consultant with Watson Wyatt Worldwide, advised that plans with company stock make sure that their CEO and CFO have no fiduciary relationship with that investment option. “They are the most likely to have insider information and, therefore, to have a conflict of interest.”

As far as plan fees are concerned, Weddell reminded attendees that they are required to make sure such charges are “reasonable” and that fees are being fairly allocated among participants.

Several discussion panel members pointed out that plans should not only have detailed investment policy statements but sponsors should make certain they are being followed. “It’s better not to have one, than to have one and not follow it,” Niziak asserted.