A Fiduciary Overview

How plan sponsors can outsource the tasks and liability associated with their retirement plans.

Reduce Your Responsibilities

What is a fiduciary?

The law defines a fiduciary as an individual who is in a position of authority and is legally obligated to act in good faith on behalf of the individuals he or she represents. A fiduciary must always put the interests of the plan’s participants and beneficiaries above his or her own interests.

The Employee Retirement Income Security Act (ERISA) establishes specific rules for qualified retirement plan fiduciaries:

• Use a prudent process to manage, or delegate the management of, the plan investments in a judicious, diversified manner.
• Verify that the plan is paying reasonable fees for services.
• Keep the plan document in compliance.
• Operate the plan in compliance with the plan document as well as with Internal Revenue Service (IRS) and Department of Labor (DOL) rules.
• Avoid conflicts of interest.
• Prevent prohibited transactions from occurring within the plan.

Making Things Easy

Who is a fiduciary?

The Department of Labor (DOL) states:

“A plan must have at least one fiduciary (person or entity) named in the written plan, or through a process described in the plan, as having control over the plan’s operation.”

Thus, it’s important to note that plan sponsors are always fiduciaries, regardless of other named fiduciaries in the plan document or anyone they hire to help with fiduciary responsibilities. However, plan sponsors can still mitigate their responsibilities.

Investment fiduciary

• 3(21): A prudently-hired investment advisor who acts as a co-fiduciary and uses their expertise to help with plan investments. The plan fiduciary still has responsibility for investment decisions.
• 3(38): A prudently-hired named co-fiduciary who acts as an investment manager and is authorized to make investment decisions.

Administrative fiduciary

• 3(16): A prudently-hired named co-fiduciary who agrees to take on specific administrative tasks for the Plan Administrator or Administrative Committee.

It’s important to remember that the employer sponsoring a plan is always responsible for oversight of anyone they have hired to act as a plan fiduciary.