Fiduciary Governance Training

FACS™

Comprehensive Fiduciary Examination

Investment Analysis

FACS™ (Fiduciary Assistance & Compliance Systems) is a fiduciary governance and documentation guidebook designed exclusively for the 401(k) Plan Sponsor. It is printed in an easy to read, color-coded fiduciary-governance-made-easy format. FACS comes in two parts; a text section and a documents section. The 100+ pages of documentation represents the foundation of the governance system. The text and documentation have been reviewed for the consistency of their methods with sound legal principles.

FACS™ is a systematic approach to fiduciary compliance that will survive changes in corporate management. It is a comprehensive solution set for auditing fiduciary conduct and mitigating liability risk. Its use is more pragmatic than pursuit of a custom fiduciary consulting assignment which is more expensive and results in a project that needs to be managed rather than a tool/solution to be implemented.

FACS™ examines the difference between plan management guided by sound business judgment and sound fiduciary judgment. Drawing distinctions between those two thought processes are critical to achieve a high standard of fiduciary conduct. The FACS™ Program identifies core fiduciary monitoring functions, describes how those functions can be acted upon and provides the audit tools to document that implementation. It provides a governance framework based on accountability. It employs checks and balances to guide the Sponsors decision making in a manner consistent with ERISAs governing principles- the Exclusive Benefit Rule and the Prudent Investor Rule.

What themes are covered in FACS™?
The FACS™ Program focuses on the process of plan management employed by a Plan Sponsor. It addresses the process of 401(k) plan management by a rigorous examination of the efficiency of the systems existing governance efficiency. It is designed to be thought provoking and to provide insight into fiduciary conduct from a systems engineering point-of-view. The FACS Program includes materials to train internal fiduciaries as to the context and details of their work.

What is the goal of the FACS program?
The goal of FACS™ is to elevate the Plan Sponsors standards of fiduciary conduct so that the fiduciaries (members of the Plan Committee and the Board) no longer represent low hanging fruit to plaintiffs counsel. In part, this is accomplished by completion of our FACS 1.11 Report, an annual fiduciary compliance report issued from the Plan Committee to the Board. It is also accomplished because faithful use of the FACS Program will result in a Plan that is more effectively governed to achieve its mission.

Why use the FACS™ program?
The scrutiny of how an employer manages their ERISA retirement plan has already increased. This trend will continue into the foreseeable future. Enhancements to corporate governance induced by Sarbanes-Oxley have failed to address the lack of sound governance practices in the retirement plan world. For many Plan Sponsors use of the FACS™ Program represents a material upgrade to their management of the Plan.

There are four factors in the ERISA landscape which will continue to influence the evolution of fiduciary conduct. They are: (1) multiple ERISA class-action lawsuits now pending, (2) the DOL’s amicus curiae briefs filed in the Enron and Williams cases in which the DOL made it clear that they hold corporate Directors and Officers personally liable for Plan losses in the event of various fiduciary failures or breaches of duty, (3) the Congressional Joint Committee on Taxation report on the ENRON debacle that called for fiduciary training and (4) a recognition in the institutional investment world that a return to the days of outsized equity returns is highly unlikely through the coming decade. In other words, the performance of the capital markets can no longer be expected to bail fiduciaries out of their liability exposure.

Doesn't my 401(k) vender protect me?
No. The 401(k) business was developed by vendors who generally do not have to live up to the standards of conduct that their customers, the Plan Sponsors, must live up to. At the same time, many Plan Sponsors have operated under the mistaken belief that their vendor handles their fiduciary monitoring activities for them. It matters a great deal now and it will matter even more in the future that a Plan Sponsor rely upon an independent systematic approach to assess fiduciary risk and implement a best practices approach to Plan management.

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