4 Questions Employee Benefit Plan Fiduciaries Should Know the Answers to– February 17, 2020 by Beth Reho

Are you the fiduciary of your organization’s employee benefit plan? If so, do you fully understand what that means? More often than not, many don’t. But it’s important to know what is required of you as a fiduciary and of the company to avoid any potential pitfalls, and liabilities, in this very important area. Below are four questions you should know the answers to.

1. What is the Role and Responsibilities of an Employee Benefit Plan Fiduciary?

The primary role of a fiduciary is to oversee the benefit plan for the organization and to protect the interests of employees enrolled in the plan. The Department of Labor (DOL) states the primary responsibilities of a fiduciary are as follows:

  • Acting solely in the interest of the participants and their beneficiaries;
  • Acting for the exclusive purpose of proving benefits and paying expenses of the plan;
  • Acting prudently and to diversify the plan’s investment to minimize the risk of large losses;
  • Following the plan documents; and
  • Avoiding conflicts of interest, in other words, they may not engage in transactions on behalf of the plan that benefit parties related to the plan, such as other fiduciaries, service providers or the plan sponsor.

Note that a person’s fiduciary status and subsequent responsibilities are based on their plan’s own function/definition. So you must understand your plan to clearly understand your particular role and responsibilities.

2. Who Can Serve as an Employee Benefit Plan Fiduciary?

Fiduciaries general include plan trustees, plan administrators and members of a plan’s investment committee.

More specifically, the Employee Retirement Income Security Act (ERISA) states that a person is a fiduciary to the plan "to the extent that he exercises discretionary control or authority over plan management or authority or control over management or disposition of plan assets, renders investment advice regarding plan assets for a fee, or has discretionary authority or responsibility in plan administration."

3. Can a Fiduciary Be Held Personally and Financially Responsible?

Yes. Fiduciaries who do not follow the principles of conduct listed above may be personally liable to restore any losses to the plan, or to restore any profits made through improper use of the plan assets.  Also, if there is more than one fiduciary to the same plan, each fiduciary has potential liability for the actions of the other co-fiduciaries. 

The good news is, a fiduciary can limit their liability if they understand the responsibilities and take proper action. Understand your organization’s particular plan and the process used by your company to document the responsibilities within it.

4. Can My Company Outsource the Fiduciary Role of our Employee Benefit Plan?

If you are still concerned about liability, hiring an outside service provider to handle the fiduciary responsibilities is always an option. This is a separate agreement whereby the service provider assumes liability for the fiduciary responsibilities documented in the agreement. After an outside provider is hired, your organization is responsible for monitoring the provider on a periodic basis to ensure they are following the plan and acting in the best interest of the participants. Another option to protect the plan is to ensure every person, including the fiduciary, who handles plan assets is covered by a fidelity bond.


The fiduciary is an important and valuable role in the employee benefit plan and the organization and should not be taken lightly. Knowing your responsibilities is an important step to help ensure you are fulfilling that role appropriately.

Contact Beth Reho at breho@cohencpa.com or a member of your service team to discuss this topic further.


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Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.