Who Is A Fiduciary?
Who Is A Fiduciary?The Employee Retirement Income Security Act (ERISA) protects your plan’s assets by requiring that any person who exercises discretionary control or authority over plan management or plan assets, has discretionary authority or responsibility for the administration of a plan, or provides investment advice to a plan for compensation, or has any authority or responsibility to do so is subject to fiduciary responsibilities.
A plan must have at least one fiduciary named in the written plan, or through a process described in the plan, who has control over the plan’s operation. The named fiduciary can be identified by office or by name. For some plans, it may be an administrative committee or a company’s board of directors.
A plan’s fiduciaries will ordinarily include the trustee, investment advisers, all individuals exercising discretion in the administration of the plan, all members of a plan’s administrative committee, and those who select committee officials.
What Is The Significance Of Being A Fiduciary?
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:
- Acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them
- Carrying out their duties prudently
- Following the plan documents
- Diversifying plan investments
- Paying only reasonable plan expenses
The duty to act prudently is one of a fiduciary’s central responsibilities under ERISA. It requires expertise in a variety of areas, such as investments. Without that expertise, a fiduciary will want to hire someone with professional knowledge to carry out the investment management.