Plan fiduciary

What a plan fiduciary is

Under ERISA, fiduciary status depends on what a person does, not their title. You are a fiduciary to the extent you exercise discretion over the plan or its assets, have discretionary responsibility for administering it, or give it investment advice for pay. Typical fiduciaries are the employer, a plan committee, the trustee, the plan administrator and investment advisers. People who only carry out tasks under someone else’s rules, such as processing payroll, are generally not fiduciaries.

The duties

The Department of Labor summarizes a fiduciary’s responsibilities as:

1. Act solely in the interest of participants and beneficiaries, for the exclusive purpose of providing benefits and paying plan expenses.

2. Carry out duties prudently.

3. Follow the plan documents, unless they conflict with ERISA.

4. Diversify plan investments.

5. Pay only reasonable plan expenses.

Why it matters to employers

Fiduciaries who fail these duties can be personally liable to restore plan losses. Prudence is judged by process: whether you gathered information, compared options, used experts when needed and documented the decision. You can hire others to take on specific fiduciary roles, such as a 3(16) plan administrator or a 3(38) investment manager, but appointing them is itself a fiduciary act, and you must monitor them.

Common mistakes

• Having no record of how investments and providers were chosen or reviewed.

• Never comparing plan fees with the market.

• Letting a decision that benefits the company, not participants, drive plan choices.

• Assuming a fidelity bond protects fiduciaries. It protects the plan against theft, and fiduciary liability insurance is a separate, optional policy.

• Believing a co-fiduciary’s breach is not your problem. A fiduciary who knows of a breach and does nothing can share liability.