A Closer Look at Fiduciary Status Under ERISA

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When you sponsor a retirement plan for your employees you are assuming an awesome responsibility. Both legally and morally.

Determining ERISA Fiduciary Status
ERISA states that a trustee, a named fiduciary, the plan administrator, an investment manager or anyone else (as relevant) will be deemed to be a fiduciary of a qualified retirement plan to the extent that the person (1) exercises any discretionary authorityor control in the management of the plan or disposition of the plan’s assets (ERISA section 3(21)(A)(i)), (2) can or does render investment advice for a fee (section 3(21)(A)(ii)) or (3) has any discretionary authority or control in administering the plan (section 3(21)(A)(iii)).Note that the test for fiduciary status is a functional one. For example, anyone from the owner of a plan sponsor on down to the janitor could be deemed to exercise or have “any discretionary authority” with respect to the plan’s assets or administration of the plan. Under ERISA, it’s what an entity actually does with respect to a retirement plan–whether or not such acts are spelled out as duties in a written document–rather than any formal (or informal) title the entity may bear that will make it a fiduciary. As a result, the ERISA section 3(21)(A) functional fiduciary test is very broad. This statutory scheme is a reminder of the broad net cast by ERISA in making sure that anybody working at the employer level (irrespective of title) that has any discretion, or any advisor that has any discretion, will be deemed to be a fiduciary of a qualified retirement plan.

As regulations change, plan sponsors will be required to understand who is a fiduciary for their plan and what each fiduciary’s role is.

Please comment or call to discuss how this affects your company retirement plan.

  • ERISA §3(38) Fiduciaries and the Flavor of the Month (401kplanadvisors.com)
  • Multiple Employer Plans – an enticing alternative for plan sponsors. (401kplanadvisors.com)
  • Brokerages may have to change business practices: DOL (401kplanadvisors.com)
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