Fiduciary Concerns and Y2K

Shanney-Saborsky, Regina
February 1999
Journal of Financial Planning;Feb1999, Vol. 12 Issue 2, p22
Academic Journal
This article looks at the implications of the Year 2000 (Y2K) computer problem for U.S. financial planners' fiduciary responsibilities. While it is difficult, at best, to predict what will occur after December 31, 1999, the Y2K issues are potentially serious since they affect not only the internal processes of a company but also the electronic communications between various entities, including financial services institutions. The U.S. Department of Labor (DOL) has stressed that, regardless of the nature or type of audit, questions regarding Y2K compliance will be asked in every case under investigation. A fiduciary must discharge these responsibilities using the standards imposed by the Employee Retirement Income Security Act of 1974, which requires that the fiduciary exercise the care, skill and diligence of a prudent man under similar circumstances. In addition, to the extent that a Y2K compliance issue may not be resolved before the century change, the fiduciary should be prepared with contingency arrangements to protect the participants and beneficiaries in the event of a computer disruption. In connection with benefit issues, the procedures should include identification of the systems needed for plan operation and the individual responsible for each system, both internally, and--if applicable--externally. With respect to communication issues, the DOL is encouraging plan administrators to disclose to participants and beneficiaries any Y2K issues in connection with the operation of the plan or issues that may affect a participant's use of their individual accounts.


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