Are You a Retirement Plan Fiduciary?

Check_One Million_20090828
Check_One Million_20090828

Are you currently a qualified retirement plan fiduciary? If so, you may have some responsibility and perhaps liability that you were not previously aware of. Retirement plan sponsors on a national basis are coming under increased scrutiny with respect to how they administer pension plans in their care. However, before we begin a discussion regarding responsibilities related to the administration of qualified retirement 401(k), 403(b), or defined benefit plans, I think it's important that we determine if we are in fact fiduciaries. Understanding who at your company has this responsibility is even more important in light of the recent downturn in the capital markets and the bear markets subsequent impact on the future retirement security of qualified plan participants.

Much of what we'll cover here comes from ERISA or the Employee Retirement Income Security Act of 1974. This Act was actually signed into law on Labor Day of that year, and this piece of legislation imposes certain obligations on those responsible for retirement plans and other employee benefits.

So who then can be considered a retirement plan fiduciary? The first person that can be considered a retirement plan fiduciary is anyone who has the ability to exercise discretionary authority or control over the management of the plan itself or the plans assets. The other type of person or entity that could be considered a retirement plan fiduciary would be a person or company compensated for providing investment advice to a retirement plan or a person or firm that has the responsibility to do so.

All retirement plans must have a fiduciary that is named in the plan document or through an appointment process described in the plan. This person is clearly a retirement plan fiduciary. However, anyone may be considered a pension fiduciary if they act in a fiduciary role. Therefore, there may be many managers and executives with responsibilities related to the company's qualified retirement plan who are fiduciaries and don't even realize that they have this responsibility.

For example, you could have a chief financial officer at a company not named in the plan document, who does provide direction to retirement plan service providers related to things such as the selection and monitoring of investment options, or the general administration of the plan who would be considered a fiduciary. In certain situations, even those not directly involved in the administration of the plan, possessed the ability to appoint these decision-makers may also be considered fiduciaries.

An important thing for these fiduciaries to appreciate is that along with this responsibility, is significant liability. For example, retirement plan fiduciaries are responsible to the full extent of their personal assets to ensure that a retirement plan is managed in accordance with appropriate regulations. This personal responsibility and liability was purposely written into ERISA regulations. It was actually the government's intent when drafting ERISA to use this personal liability as a law's teeth.

So, you’ve determined you are fiduciary, now what? Fortunately, there are a number of processes you can follow to enhance the overall management of your retirement plan on behalf of your participants that also go a long way to minimizing the personal liability that plan sponsors and other fiduciaries have. Effective fiduciary liability management and mitigation will be the subject of future articles.


Dean Piccirillo offers insurance products through HBK Sorce Insurance LLC. Investment advisory services are offered through HBK Sorce Advisory LLC d/b/a HBKS Wealth Advisors. Mr. Piccirillo is not able to transact business in a state that he is not licensed or registered.