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ERISA & Fiduciary Responsibility

Discharging Fiduciary Responsibilities

Who is a Fiduciary?

Under ERISA any person or corporation that:

  • Has any discretionary authority or responsibility in the administration of a plan
  • Renders investment advice for direct or indirect compensation
  • Exercises any discretionary authority or control over: - The assets held under the plan - The disposition of plan assets is a fiduciary.

Uniform Fiduciary Standards of Care

    1. Know standards, laws and trust provisions.
    2. Diversify assets to specific risk/return profile of client.
    3. Prepare investment policy statement.
    4. Use “prudent experts” (money managers) and document due diligence.
    5. Control account for investment expenses.
    6. Monitor the activities of “prudent experts.”
    7. Avoid conflicts of interest and prohibited transactions.

The IRS & Fiduciaries

A fiduciary must carry out duties with the care, skill, prudence and diligence of a prudent person familiar with such matters.

  • Follow the plan documents
  • Diversify the plan investments
  • Defray the reasonable expenses of the plan
  • Deposit contributions in a timely manner

Limiting Liability

Fiduciary responsibilities cover the process used to carry out plan functions rather than the end results.

  • Processes should be documented
  • Decisions should be documented
Hire a service provider and
  • Do your due diligence
  • Document your selection process
  • Monitor their performance
  • Read their reports
  • Check actual fees charged
  • Ask about policies and practices
  • Follow up on participant complaints

Prohibited Transactions

There are certain transactions that are prohibited under the law to prevent dealings with parties that have certain connections to the plan, self dealing or conflicts of interest that could harm the plan.


Persons handling plan funds generally must be bonded to protect the plan against fraud and dishonesty.

The DOL & Fiduciaries

Fiduciary status is based on the functions performed for the plan, not just the person’s title.

A plan must have at least one fiduciary named in the written plan as having control over the plan’s operation.

A plan’s fiduciaries will ordinarily include:

  • Trustees
  • Investment advisors
  • All individuals exercising discretion in the administration of the plan
  • All members of the administrative committee
  • All those who select committee officials

Acting prudently is one of a fiduciary’s central responsibilities under ERISA. It requires expertise in a variety of areas, such as investments. Hiring an investment advisor is prudent when investment expertise is lacking. Prudence focuses on the process for making fiduciary decisions. Therefore, it is wise to document decisions and the basis for those decisions.


Fiduciaries who do not follow the basic standards of conduct may be personally liable to restore any losses to the plan, or restore any profits made through improper use of the plans assets resulting from their actions.

ERISA requires plan administrators to furnish plan participants and beneficiaries with specific documents
and reports and to file government reports.