Your company probably offers its employees a retirement plan. If so, can you identify all of your plan fiduciaries? From a risk management perspective, it is critical for business owners to know who has fiduciary status and the associated liability. Here are some common, though in some cases overlooked, plan fiduciaries:
Named fiduciaries. The Employee Retirement Income Security Act of 1974 (ERISA) requires a plan to have named fiduciaries. The plan document identifies the corporate entity or individual serving as the named fiduciary. If they are not immediately identified, the plan document will set the requirements for naming them.
Plan trustees. These are people who have exclusive authority and discretion to manage and control the plan assets. The trustee can be subject to the direction of a named fiduciary. These plan fiduciaries have a broad scope of responsibility.
Board of directors and committee members. The individuals who choose plan trustees and administrative committee members are considered under ERISA to be fiduciaries. Typically, these are the members of the corporate board of directors. The scope of their fiduciary duty focuses on how they fulfill that specific function and not on everything that happens with the plan itself. The law also sees people who exercise discretion in key decisions about plan administration as fiduciaries, including members of the administrative committee, if such a committee exists.
Investment managers and advisors. The named fiduciary can appoint one or more investment managers for the plan’s assets. People or firms who manage plan assets are plan fiduciaries. However, individuals employed by third party service providers can fall into different fiduciary categories. The investment manager who has complete discretion over plan asset investments has the greatest fiduciary responsibility. In contrast, a corporation or individual who offers investment advice, but does not actually call the shots, has a lesser fiduciary responsibility.
These are just a few examples. Anyone who exercises discretionary authority over any vital facet of plan operations may be considered a ‘functional fiduciary.’ Please contact our firm for a review of your retirement plan and its fiduciaries.