Skip to main content

You are here

Advertisement

Hot Potato: Fiduciary Roles

Remember the kids' game, Hot Potato? Seems like there's a grown-up version too, for plan administrators who perform a fiduciary role. That was what Nicholas J. White, Special Counsel at Trucker Huss, addressed in an Oct. 28 session at ASPPA's 2014 Annual Conference at National Harbor, Md.

Named fiduciaries have broad responsibilities under ERISA Section 402(a): establishing and adjusting the plan’s investment policies, overseeing plan operation and administration to ensure proper payment of benefits, appointing investment advisors and managers, directing trustees regarding investment of assets, and overseeing and monitoring the activities of those to whom responsibilities have been delegated. “There is no one way to do this,” White said. Nonetheless, he added, these issues need to be addressed.

ERISA Section 404(a) requires a fiduciary to discharge his or her duties solely in the interest of the participants and beneficiaries to provide benefits to them, defraying the reasonable expenses of administering the plan. The fiduciary must do that with the care, skill and diligence that a prudent person would use. But what if a plan fiduciary lacks the skills to do that? Then “they have to hire that expertise,” said White.

When doing that and using an automated system, it's important to maintain proper documentation, suggested session moderator Dodi Walker Gross, partner at Reed Smith LLP. “It is a very challenging situation that you need to manage,” she said. White emphasized the importance of internal controls in the context of plan administrator duties under ERISA Section 3(16).

Under ERISA Section 3(38), investment managers also are fiduciaries. And, said White, “there is no way to get around the duty to monitor that individual.”

But how to do that? White suggested reviewing their performance against the investment policy statement and putting out a request for proposals, to see if anyone else can do better. Gross added that benchmarking is another way to conduct such a review.

And be careful about seeking the role of co-fiduciary; it may not be a panacea. “If there is any thought on the part of the plan sponsor that they’ve off-loaded their fiduciary responsibilities, they’re sadly mistaken,” said White of those who seek to be co-fiduciaries. “Every fiduciary has fiduciary liability,” he cautioned.