ERISA Fiduciary
Definition
A
plan fiduciary is defined under ERISA Section 3(21) as an individual that: 1)
has discretionary authority or control with respect to management of the plan
or disposition of plan assets; 2)
renders investment advice for a fee; or has discretionary authority or responsibility
for the administration of the plan.
In
addition, under ERISA Section 3(38) an individual is also a fiduciary if he or
she agrees in writing to be an investment manager for the plan, having the
power to manage, acquire or dispose of any assets of the plan. This individual
is either: 1) a registered investment advisor under the 1940 Act; 2) is not
registered under the Act but is registered with the state; or 3) is a bank or
an insurance company.
There
is a third fiduciary definition under ERISA Section 3(16) for an individual who
is a plan administrator. This individual agrees to take responsibility for
either all of the daily operation of the plan or agrees to take responsibility
for only certain functions.
Plan
administrator under ERISA 3(16) is A) The person named in the
plan document; or B) If no person is named then the plan sponsor
is the plan administrator; and C) In the case of a plan maintained by two or
more employers it is the association, committee, joint board or trustees, or
other similar group of representatives of the parties who establish or maintain
the plan.
Determination
of fiduciary responsibility is based on the functions of the individual and
not necessarily the job title. This person (or group) must have discretionary
authority or control over the management (primarily related to plan assets) or
administration of the plan (primarily the operation of the plan). Frequently, management and administration
duties overlap.
Examples of the
duties of a plan administrator under ERISA 3(16) that may involve fiduciary
decisions or responsibilities include (but are not limited to):
A)
Plan Management and Administration:
- Selection, evaluation and monitoring of:
- Trustee(s)
- Service Providers
- Document Provider
- Evaluation of all plan fees (e.g., services provider fee disclosure and determination of which fees may be paid by the plan)
- Decision to delegate Plan administration responsibilities to other fiduciaries
B)
Operation of the Plan:
- Interpretation of the plan document
- Timely and accurate reporting and disclosure (e.g., Form 5500, distribution of SPD/SMM, participant fee disclosure, benefit statements, QDIA notices and other required participant disclosures)
- Distribution of benefits
- Administration of QDROs (develop procedures and process)
- Administration of Loans (develop procedures and process)
Certain "ministerial
functions" are not fiduciary duties. For
example, if a service provider performs these
plan administration functions based on established plan policies,rules,
procedures, etc. that were made by others, the service provider does not have discretionary
authority over the plan management or administration of the plan. Some examples
of ministerial functions are:
- Application
of the plan's eligibility rules
- Preparing
the Form 5500
- Collecting
contributions
- Preparing
benefit statements
- Making
recommendations to someone that has decision making authority
Fiduciary and
co-fiduciary liability under ERISA Section 405:
If
the plan provides, the named fiduciaries may allocate responsibilities among themselves
or to others. In this case, each named fiduciary will only be liable for
his/her responsibilities and not for those of the other fiduciaries. Each
fiduciary is personally liable for any breach of responsibility he/she directly
commits. Co-fiduciary liability can occur under certain circumstances if a
fiduciary:
- Knowingly participates in or conceals an act that is a breach of fiduciary
duty;
- Enables a breach of fiduciary duty to occur, by another fiduciary, by failing
to perform his/her fiduciary duties; or
- Knows of a breach of fiduciary duty but makes no reasonable effort to remedy
the situation. Any fiduciary that breaches his/her fiduciary responsibility is
personally liable to make good on any losses to the plan.