Accidental HR℠ and Plan Fiduciaries. Who IS responsible?
As we all know, the world of investments has very strict guidelines. As someone who has accidently (or on purpose) fallen into the HR role, this can be confusing and a bit scary.
In recent years the term fiduciary has not only been in the headlines, but the definitions have been expanded and more specifically defined. Many plan sponsors (and you may be one of them) are asking whether or not their financial advisor is serving in a fiduciary capacity for their qualified retirement plan.
How does ERISA (the federal law that sets minimum standards for pension plans in private industry) define a fiduciary? Under ERISA Section 3(21)(A), a person is a fiduciary to the extent that the person:
- Exercised ANY discretionary authority of control over plan management or disposition of plan’s assets.
- Provides investment advice for a fee or has any authority or responsibility to do so
- Has ANY discretionary authority or responsibility over plan administration
There are categories of ERISA fiduciaries.
Named Fiduciary – who is typically the employer sponsoring the 401k plan
Investment Manager – ERISA Section 3(38) defines this as a fiduciary who has the power to manage, acquire, or dispose of any asset of a plan, is a registered investment advisor and has acknowledged in writing that he or she is a fiduciary with respect to a plan.
Trustee – the person recognized as having exclusive authority and discretion over the management and control of plan assets.
Investment Advisor – ERISA 3(21) a person who renders advice or provides recommendations for a fee regarding the purchase or sale of securities and passes the DOL regulations under a five-part test.
Plan Administrator – under ERISA 3(16) the plan administrator who generally has discretion over the administration of the plan.
ERISA imposes some very specific responsibilities to fiduciaries who manage, control or otherwise have the authority to invest plan assets. A fiduciary who breaches his or her obligation can be required to forgo any profits made as a result of the breach, and is personally liable for reimbursing the plan for any losses resulting from the breach. We know, you want to do this correctly, right?
There is no way to completely eliminate a plan sponsor’s fiduciary duties through hiring professionals to take on some of the plan activities. It is important to determine who your plan’s fiduciaries are and to what extent are they taking on this role for your retirement plan.
Wondering where to even begin? Call HR Resolutions today and we can help! Connect with us on Facebook for HR info and be sure to share our blogs with your friends!
