Fiduciaries are responsible for the management of employee retirement plans in many regards, including plan investments and plan administration. As such, fiduciaries have responsibilities to both their participants as well as their employers, to hold to the fiduciary standards in all aspects of their work.
Fiduciaries have important responsibilities and are subject to standards of conduct because they act on behalf of participants in a retirement plan and their beneficiaries. These responsibilities include:
ERISA, while not applicable to public sector plans, is the primary resource for guidance for fiduciary responsibilities. State laws, on the other hand, do apply to public sector plans, and language about fiduciary responsibilities and requirements can be found in trust provisions. Under ERISA, there are two types of fiduciaries: named and functional. Named fiduciaries are just that: identified by position, title or name as a fiduciary to the plan. Functional fiduciaries are those who have discretion over plan administration and investments; who provide advice to the trustees or administrators, or who have decision-making authority over the plan investments.
Individuals become fiduciaries by title or by actions. ERISA broadly defines a retirement plan fiduciary as a person or entity that does any of the following with respect to a retirement plan, such as:
A plan’s fiduciaries will ordinarily include the trustees, investment advisors, plan administrators, plan sponsor, members of the plan sponsor’s board of directors, corporate officers, and those who select committee members. The key to determining whether a person or entity is a fiduciary is to determine whether they are exercising discretion over the plan.
Under ERISA, there are three types of functional fiduciaries:
Most advisors are typically either 3(21) or 3(38) advisors. Please consult with your advisor to further discuss fiduciary roles, responsibilities and duties for your plan.
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