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Fiduciary basics

Who is a fiduciary and what are their responsibilities?

It's important to know whether you are a fiduciary or not. Learn more below or review the FAQ.

If your plan is subject to ERISA, a “fiduciary” is an individual, corporation or association holding assets in trust (or a permissible trust substitute) for another party, often with the authority and legal duty to make decisions regarding financial matters on behalf of the other party.
 

ERISA provides that anyone who has discretionary control over plan assets is considered a fiduciary. This can include:
 

  • Plan sponsors
  • Plan administrators
  • Trustees — directed trustees have limited liability
  • Investment managers

If you are not subject to ERISA because you are an exempt organization (e.g., public school, public university, governmental entity, church) you may have state imposed quasi-fiduciary standards that you must adhere to. To learn more, click here.

If your organization holds assets for employees in the form of a retirement plan, you or another designated individual is responsible to:
 

  • Make decisions in the sole interests of participants and beneficiaries
  • Execute your responsibilities with the care, skill and due diligence of a prudent person
  • Select a diverse range of investments
  • Monitor for prohibited transactions (For instance, prohibited transaction would be a direct or indirect loan between a qualified plan and the investment manager of the plan)
  • Respond to inquiries. Fiduciaries must fully and accurately respond to all inquiries. Misleading communications, misrepresentations or omissions may constitute a breach of fiduciary duty
  • Follow the plan document
  • Be “bonded”

Additionally, some best practices you may want to follow include:
 

  • Document all actions and decisions in writing
  • Follow a process that ensures decisions are well-informed and consistent with the plan’s objectives
  • Make decisions in the sole interests of participants and beneficiaries
  • Follow the plan document
  • Select a diverse range of investments
  • Monitor performance and costs of investment options in plan
  • Are you “bonded”?

The Department of Labor offers extensive educational materials, as well as legislative and regulatory updates, on their website: www.dol.gov/ebsa. It is a useful resource for ongoing education.