fiduciary responsibility

There has been a lot of discussion recently regarding fiduciary responsibility. The Department of Labor (DoL) and the Securities and Exchange Commission (SEC) have been tangling over who has the right to regulate retirement plan fiduciary issues. Many employers are confused and have questions.

As an Accredited Investment Fiduciary (AIF), I am a retirement plan fiduciary compliance expert. Following are answers to the eight fiduciary responsibility questions I hear most often from employers.


Most Frequent Employer Fiduciary Responsibility Questions


1. Am I a fiduciary?


A 401k plan sponsor is always a fiduciary and can never climb out of the fiduciary boat. As a general rule, anyone employed by a plan sponsor who acts in a fiduciary role with respect to the retirement plan is a fiduciary.

Acting in a fiduciary role generally means that an individual has decision-making authority for a 401k plan. As a result, typically every member of the Investment Committee is a fiduciary as well as anyone who exercises discretion in relation to your 401k plan.


2. There have been a lot of changes from the DoL and SEC regarding fiduciary responsibility. How has that affected employers?


Not one bit.

Employers have not been impacted at all by the changes/discussions that have taken place recently regarding fiduciary responsibility. The changes have been focused on financial advisors.


3. Is our plan’s investment advisor a fiduciary? How would I know?


It is very unusual for investment advisors not to be fiduciaries to the 401k plans they work with. However, it is possible. Look in the contract you signed with your advisor. If your advisor is a fiduciary, the contract will have language stating they are an ERISA Section 3(38) or 3(21) fiduciary.

If you have difficulty finding that sort of language, call your advisor and ask. If your advisor is not a fiduciary, you should seriously think about hiring a different one.


4. Our plan’s recordkeeper is a fiduciary, right? And the attorney we use for our 401k plan is probably a fiduciary too, correct?


Your plan’s recordkeeper and attorney are not likely to be fiduciaries because they do not have discretionary (decision-making) authority. Your plan’s custodian, accountant, payroll vendor and any consultants are probably not fiduciaries either.


5. If an investment fund that the Investment Committee selected loses money, are the fiduciaries liable for the loss?


Provided the Investment Committee acted prudently when choosing and monitoring the fund, the answer is no. Fiduciaries are not responsible for insuring investment fund performance.


6. We always do what our investment advisor tells us to do. As a result, there is no way we could be liable for any fiduciary breach, right?


Wrong.

Although you are not expected to have the knowledge of an expert, failing to exercise proper due diligence when reviewing a recommendation made by an expert may lead to liability, in the event of a breach.


7. My boss appointed me to our 401k plan’s Investment Committee because he didn’t have time for it. Am I a fiduciary?


Not only are you a fiduciary but so is your boss. Anyone who has the ability to appoint a fiduciary is a fiduciary. Also, once you have been appointed to the Investment Committee you can’t escape your fiduciary responsibility by not attending meetings or resigning without finding a replacement.


8. Are there ways to manage fiduciary risk and the associated liability?


Yes, many. Your firm should have fiduciary liability insurance and your plan should also have an ERISA fidelity bond. You can contract for co-fiduciary services and elect to comply with the various safe harbors the regulations offer, including Section 404(c).

Do you have other questions about your fiduciary responsibility? If so, email me and I will do my best to answer you.

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About the Author

Robert C. Lawton, AIF, CRPS is the founder and President of Lawton Retirement Plan Consultants, LLC. Mr. Lawton is an award-winning 401(k) investment adviser with over 30 years of experience. He has consulted with many Fortune 500 companies, including: Aon Hewitt, Apple, AT&T, First Interstate Bank, Florida Power & Light, General Dynamics, Houghton Mifflin Harcourt, IBM, John Deere, Mazda Motor Corporation, Northwestern Mutual, Northern Trust Company, Trek Bikes, Tribune Company, Underwriters Labs and many others. Mr. Lawton may be contacted at (414) 828-4015 or bob@lawtonrpc.com.

About Lawton Retirement Plan Consultants, LLC

Lawton Retirement Plan Consultants, LLC (LRPC) is a Milwaukee, Wisconsin-based independent, objective Registered Investment Adviser (RIA) providing investment advisory, fiduciary compliance, employee education, provider management and plan design services to employer retirement plan sponsors. The firm specializes in Socially Responsible Investment (SRI) strategies for retirement plans and is a pioneer in the field. LRPC currently has contracts in place to provide consulting services on nearly a half billion dollars in plan assets. For more information, please contact Robert C. Lawton at (414) 828-4015 or bob@lawtonrpc.com or visit the firm’s website at https://www.lawtonrpc.com. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser.

Important Disclosures

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance, tax, legal or investment advice. Each plan has unique requirements and you should consult your attorney or tax adviser for guidance on your specific situation. In no way does Lawton Retirement Plan Consultants, LLC assure that, by using the information provided, a plan sponsor will be in compliance with ERISA regulations. Investors should carefully consider investment objectives, risks, charges and expenses. The statements in this publication are the opinions and beliefs of the commentator expressed when the commentary was made and are not intended to represent that person’s opinions and beliefs at any other time. The commentary does not necessarily reflect the opinion of Lawton Retirement Plan Consultants, LLC and should not be construed as recommendations or investment advice. Lawton Retirement Plan Consultants, LLC offers no tax, legal or accounting advice, and any advice contained herein is not specific to any individual, entity or retirement plan, but rather general in nature and, therefore, should not be relied upon for specific investment situations. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser and accepts clients outside of Wisconsin based upon applicable state registration regulations and the “de minimus” exception.