When is accepting a gift a problem for fiduciaries?
The Fiduciary360 blog is a great source of fiduciary news, concepts and thought leadership for employers (plan fiduciaries) and advisors acting as fiduciaries. Christmas is upon us, and with that, showing our gratitude to our clients can create potential conflicts of interest, just as advisors like us can receive from providers and TPA’s. Again, the esoteric term “reasonable” comes into play when determining the cost and scope of a gift. Fortunately, fi360 has illustrated the limits that EBSA has defined:
EBSA’s guidance is instructive for all fiduciaries, not just plan sponsors. The first step is to have a gift policy that provides guidance regarding their acceptance. A typical policy would set parameters under which gifts can be accepted and may include:
- the maximum monetary value allowed ($200-$300 seems reasonable)
- prohibition from certain types of gifts, such as high profile sports events (Super Bowl, World Series, etc.)
- a requirement to keep a record of all gifts received (this would not normally include things like an occasional lunch)
Of course, the policy could be that no gifts of any type or amount can be accepted at all, but this would most likely be excessive. Most policies would allow gifts of a nature that could not reasonably be interpreted as influencing decisions as a result. So, in general, think fruit baskets, rather than Final Four tickets.
I have had many interactions with salespeople from other industries. A friend of mine is a wholesaler for the non-retirement insurance industry, it seems to be normal practice to take prospects and brokers out to numerous sporting events, picking up the bar tab prior to the event, etc. Unfortunately, this can be highly confusing for employers who view that scenario as a normal part of building the relationship or a “perk” of working with certain benefit providers.
It is not to say decision makers are being egregious. Not at all. I’ll be the first to admit that I like gifts. A lot. It makes me think differently about the person/organization that gave it to me. The crux of the issue is that when dealing with a retirement plan in which a fiduciary is commissioned to put their employees’ interests above their own, a plan’s fiduciaries must consider whether a gift is or could be affecting their ability to make decisions that may not be beneficial to the gift giver.