Plan trustee

What a plan trustee is

The trustee is named in the plan or trust document, or appointed by a named fiduciary. A discretionary trustee has authority to manage and invest plan assets. A directed trustee follows proper instructions from the plan’s named fiduciary, an investment manager or the participants, and has narrower responsibility. A trustee can be one or more individuals, often the owner or officers, or a bank or trust company.

Why it matters to employers

A trustee is not the same as a custodian, which keeps the assets safe and settles trades, or a recordkeeper, which tracks each participant’s account. If individuals at your company are named as trustees, they are personally responsible as fiduciaries and must be covered by the plan’s fidelity bond. Know who your trustee is and whether the role is directed or discretionary.

Example

A small company’s owner is named as trustee in the plan’s adoption agreement, and a trust company holds the assets as custodian. The owner signs the trust agreement, is responsible for seeing that contributions reach the trust, and is covered by the fidelity bond.

Common mistakes

• Not knowing who the plan’s trustee is.

• Leaving former officers named as trustees after they have left the company.

• Assuming a directed trustee monitors the plan’s investments.