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Am I an ERISA/401k Fiduciary?

September 29
15:48 2009

You may be an ERISA/401k fiduciary and not know it. You don’t have to be a named trustee or even a high level executive to be deemed a fiduciary. What’s more, you might think merely hiring an outside service provider might remove that “fiduciary” 1193476_38811845_question_mark_stock_xchng_royalty_free_300label and its inherent liability. Unfortunately, the U.S. Department of Labor (DOL) says this just ain’t so.

According to the DOL in its on-line fiduciary education resource (elaws – ERISA Fiduciary Advisor – Introduction), “Fiduciaries are those individuals and/or entities who manage an employee benefit plan and its assets.  Employers often hire outside professionals, sometimes called third-party service providers, or use an internal administrative committee or human resources department to manage some or all of a plan’s day-to-day operations. Employers who have hired outside professionals or who use internal committees/resources still have fiduciary responsibilities.”

Furthermore, ERISA Section 3(21)(A) states:

Except as otherwise provided in subparagraph (B), a person is a fiduciary with respect to a plan to the extent

(i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets,

(ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or

(iii) he has any discretionary authority or discretionary responsibility in the administration of such plan. Such term includes any person designated under section 1105 (c)(1)(B) of this title.

Subparagraph (B) merely states a mutual fund (and its associated parties) does not become a fiduciary just because a plan invests in it.

So, while a plan may have a named fiduciary or trustee, other employees, officers and directors may also take on the capacity of a fiduciary. Any individual, irrespective of title, becomes an ERISA/401k fiduciary immediately upon exercising any type of discretion or control over plan administration or plan assets. This includes the so-called “chain of command” (see the March 26, 2009 MarketWatch article “Who’s minding your retirement plan?” for more on this term), which may extend the definition of fiduciary all the way up to the board of directors.

So, the first step to reducing your personal fiduciary liability it to fully understand under what conditions you may be acting as a fiduciary.

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About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA

1 Comment

  1. Pat
    Pat December 22, 12:52

    It’s common knowledge, isn’t it, that ERISA says that once done, ERISA assets don’t change their character, regardless of what form they happen to be valued. Impossible to be fiduciary one minute and not the next. Etither are, or are not a fiduciary, and ERISA makes the rules, not fiduciaries, even with some discretionary authority. No right to declare, or disguise fiduciary status.

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