Avatar: Ruling May Increase Fiduciary Responsibility

“With this clarification, we now know that the burden of determining the prudence of investing in tiered asset mutual funds — especially concerning actual and/or potential conflicts of interest, self-dealing, lower rates of return, overexposure to equities, and high administrative and investment fees — is directly the responsibility of plan sponsors, something that plan sponsors might not have fully understood prior to the issuance of this advisory opinion,” Avatar says.

The opinion appears to be helpful for mutual fund companies, but it also appears to increase the fiduciary burden on plan sponsors, Avatar says.

“Plan sponsors must now undertake appropriate procedural and substantive due diligence regarding target-date funds,” the firm says.