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ERISA (Employee Retirement and Income Security Act) imposes high standards of fiduciary duty upon those responsible for administering a retirement plan and investing its assets. Those responsible for such functions are referred to as fiduciaries. Determining who qualifies as a fiduciary to a plan is an important step for plan sponsors.
A plan fiduciary is any person that exercises discretionary authority or control in regards to the management of the plan or management or disposition of its assets, renders or has authority or responsibility to render investment advice for a fee, or has discretionary authority or responsibility in the administration of such plan. Neither a person’s title nor position indicates the legal designation of fiduciary. But, some positions, such as a plan administrator or trustee, may require any person who holds them to perform defined fiduciary functions.
A named fiduciary is a person who is identified in the plan’s governing documents, or who, according to a procedure specified in the plan, is identified as a fiduciary by: (1) a person who is an employer or employee organization with respect to the plan, or (2) the employer and employee organization acting jointly.
The general standards governing fiduciary conduct are set forth in section 404(a) of ERISA which requires, among other things, that fiduciaries perform their duties:
- In the interest of plan participants;
- For the benefit of plan participants;
- With prudence and expertise;
- By diversifying the assets to minimize the risk; and,
- In compliance with the plan documents.
In addition to the above, plan fiduciaries cannot engage in any prohibited transactions.
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