The Role and Responsibilities of the Individual Trustee

Being the fiduciary to your company 401(k) plan is a vitally important function. Your employees and their beneficiaries depend on you to make the best decisions possible. This responsibility also carries with it the associated risks and liability.

Reach Skilled Volunteering
Reach Skilled Volunteering (Photo credit: Wikipedia)

Fiduciary responsibility covers a well-defined set of assets. These assets must be managed for the ultimate benefit of someone else. As a fiduciary, you may be responsible for any one of many types of assets. You, as a corporate director or officer, may be the trustee of an employee benefit plan. You, as a Board member or officer, may be a trustee for a college endowment or the endowment of any other not-for-profit institution. You may be the trustee for the estate or foundation of a family member or close friend. In all these situations, the buck stops with you. And it’s not even your buck.Ironically, you may have this same fiduciary responsibility to manage your own possessions. These assets may include your residence and your career as well as your taxable and tax deferred investment portfolios. Even if you own the assets today and will own them in the future, you must act as a trustee. Why? Because the beneficiary of your personal assets is not the you of today, but the you of tomorrow. With this in mind, the you of today must manage your possessions for the sole benefit of the you of tomorrow. This requires great discipline. The good news is you can’t sue yourself for a breach of fiduciary duty. Still, this doesn’t mean your liability vanishes, it just shows us in a different way. For example, rather than taking your younger self to court for mishandling your own retirement funds, you’re merely punished by not living the retirement lifestyle you had dreamt of – or by living in your kid’s basement, which may or may not be the same thing.

Plan sponsors are, by default, fiduciaries to the plan participants and their beneficiaries. Many plan sponsors believe that their service providers have taken care of everything. Case law is full of examples that this assumptions is false.

Please comment or call to discuss how this affects you and your organization.

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