A: The history of the retirement plan fiduciary role stems from trust law but also involves ERISA (Employee Retirement Income Security Act). Being a fiduciary means that you are tasked with operating the plan in the best interest of plan participants. If you are a fiduciary, this role can carry potential personal liability and should be treated as a serious responsibility.

Q #2:Am I a fiduciary to my retirement plan?

A: This is obviously a very important question. A person is a fiduciary if one of two things occurs:

• He or she is specifically named within the retirement plan documents as a plan administrator, trustee or named fiduciary. (OR)
• He or she exercises discretion or control over the plan. In that case, the individual may meet the Department of Labor’s definition of a fiduciary through his or her actions. An example would be an individual signing off on Form 5500, assisting with the selection of service providers, voting on what investments to offer employees, etc.

Q #3: As a fiduciary to my retirement plan, what are my responsibilities?

A: Your responsibilities depend on the role that you hold as a fiduciary. There are three core fiduciary roles within a retirement plan (described more in depth in “Peeling Back the Fiduciary Layers and Unscrambling the Fiduciary Confusion” at 401khelpcenter.com).

• Named Fiduciary - This is the fiduciary to whom participants and beneficiaries can turn when it comes to the operations of the plan. A named fiduciary is responsible for the plan’s management and administration; however, these tasks and responsibilities can be delegated to fiduciaries and non-fiduciaries such as trustees, administrators, investment advisors and ministerial staff.
• Discretionary Trustee - A position appointed by the named fiduciary, the trustee exercises discretion over plan assets within the trust. The discretionary trustee helps choose the assets, e.g., mutual funds or other investments, in which employees’ funds are invested. Normally the assets are held in a trust by a custodian who assists with safekeeping, buying and selling investments, etc. The custodian would usually act as a “directed” trustee — meaning they would only follow directions and do not have any discretionary authority. An example would be if a company uses XYZ Company for recordkeeping and XYZ Company’s trust company acts as the custodian and the “directed” trustee. XYZ Company has agreed to take direction from the discretionary trustees of the plan, who will continue to be the fiduciary(s).
• Administrator - This is also a position that can be appointed by the named fiduciary but is commonly filled by the plan sponsor. The role of an administrator is to do just that, administer the plan and ensure its compliance with plan documents and satisfaction with service providers. Tasks could include selecting of service providers, administration of loans and distribution requests, distributing required notices, etc.

Q #4: As a fiduciary, how do I limit myliability?

A: Document, Delegate and Insure is the simple answer.

• Document - Read through the current plan document to understand who is designated as plan fiduciaries. Amend the plan if changes need to be made for employees no longer with the company, etc. The other important component is to document the processes used to evaluate the plan and all decisions made in fulfilling fiduciary responsibilities. In any examination or other interaction with regulators, it is critical to have documented how and why plan level decisions were made.
• Delegate - Consider engaging service providers that can take on fiduciary roles or assist fiduciaries in performing tasks in a more efficient/knowledgeable manner. Investment advisors can operate in a shared or delegated investment fiduciary role and record keepers, attorneys and third-party administrators can also assist in administrative capacities.
• Insure - Investigate whether or not your company has fiduciary liability insurance for plan fiduciaries. If not, it may be worthwhile to protect them against personal liability.

Being a fiduciary charged with acting prudently on behalf of all the plan participants is an important position. Understanding the answers to these common retirement plan questions is a great start.

We want to hear from you! Contact the Institutional Services Team of Sequoia Financial Advisors atretire@sequoia-financial.comfor further discussion.

The views and opinions expressed in this article do not necessarily reflect those of Cohen & Company.

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