United States: The Big Mistake Too Many Retirement Plan Fiduciary Committees Are Making—And What To Do About It

Last Updated: May 20 2019
Article by Alden J. Bianchi

Formally organized retirement plan committees have become the norm in recent years. Retirement plans, particularly 401(k) plans, have increasingly adopted consultant-advised governance structures that include fiduciary committees in order to comply with the Employee Retirement Income Security Act of 1974 (ERISA). While we applaud this development, plan sponsors often fail to properly establish retirement committee jurisdiction. The result is an unnecessary proliferation of plan fiduciaries—a/k/a possible defendants—who could be individually named in the event of fiduciary litigation. This post explains how to set up and monitor a retirement plan fiduciary committee in a manner that insulates the plan sponsor's board and senior management from unnecessary fiduciary exposure. The process is surprisingly simple.


Sometime in the last dozen-and-a half years, dating back at least to litigation involving the Enron 401(k) plan, there began a shift in retirement plan governance. Before then, most plan sponsors were content to simply "outsource" their 401(k) plan to a platform provider—typically a bank, mutual fund complex or insurance company—and let them run the plan. That they might need to pay some attention to plan governance, or even that "plan governance" was a thing, dawned on sponsors only slowly.

In the fall of 2003, a federal district court in Texas denied motions to dismiss the ERISA claims in Tittle v. Enron (In re Enron Corp. Sec. Derivative & ERISA Litig.), 284 F. Supp. 2d 511 (S.D. Tex. 2003). The 300-page opinion caught plan sponsors by surprise. The lawsuit included claims again Enron's board and senior management as well as its retirement plan committee. Had Tittle v. Enron been an isolated incident, plan sponsors may have forgotten about it. It was not. In 2006, 13 separate lawsuits were filed against major companies claiming that these employers violated their fiduciary obligations under ERISA by selecting funds for their 401(k) plans that charged allegedly excessive fees. These lawsuits were just the beginning of a burgeoning cottage industry among plaintiffs' law firms against 401(k) and later 403(b) plans. Fiduciary plan committees have become a first line of defense as plan sponsors and fiduciaries seek to insulate themselves from liability. The particular focus is on the selection and monitoring of self-directed 401(k) and 403(b) plan investment options, which require an added layer of fiduciary intervention to insure that the plan fiduciaries are not held liable for investment choices made by rank-and-file plan participants.

A quick internet search of retirement plan or 401(k) plan fiduciary committees returns a plethora of slickly produced PowerPoint presentations, white-papers, advisories, and full-color brochures showing the key features and listing the salient attributes of retirement plan committee formation, function and structure. Committee charters, virtually unheard of a few years ago, are now commonplace. Little is said, however, about the legal status and jurisdiction of the committee. Nor is much attention given to the extent to which committees supplant the authority of management or boards or directors. Simply put, plan sponsors too often seem unconcerned with the retirement committee provenance. This needs to change.

The Parameters and Devolution of Fiduciary Authority

ERISA fiduciaries must, among other things, discharge their duties solely in the interest of plan participants and beneficiaries and for the exclusive purpose of providing benefits and defraying reasonable administrative expenses. In addition, ERISA fiduciaries are held to a duty of prudence, must diversify investments, and must follow plan documents. Creating and following processes for plan investment selection and administration, and documenting such acts, can be instrumental in showing that ERISA fiduciaries have met their duties.

A person can become a fiduciary to an ERISA-covered plan by being named in the plan (a "named fiduciary"), by position (the plan's trustee, plan administrator and investment manager are always considered fiduciaries), by exercising discretion authority or discretionary control over a plan's management, assets or administration (a "functional fiduciary") or by being appointed by another person. There must be a named fiduciary.

By default, the plan sponsor (typically, the employer of the plan's participants) is the ERISA "plan administrator" unless some other person or entity is appointed to the role. The "plan administrator" is responsible for satisfying the reporting and disclosure requirements of ERISA, e.g., the preparation and distribution of summary plan descriptions and the filing of annual reports. The plan administrator also adjudicates claims and satisfies any income tax withholding requirements on plan distributions.

Named fiduciaries can be either named in, or appointed pursuant to a procedure established by, the plan document. The named fiduciary may further delegate aspects of his or her fiduciary duty to other fiduciaries. The U.S. Department of Labor is of the view, supported by case law, that named fiduciaries cannot fully off-load their fiduciary duties by delegating these duties to others, e.g., to a plan retirement committee or third party administrator. Rather, the delegating fiduciary must ensure that the delegation was prudent and remains so thereafter. This latter, italicized requirement is the source of the "duty to monitor." While the contours of the duty to monitor are not perfectly defined, there is general agreement that some sort of periodic reporting back up to the appointing fiduciary is a minimum requirement.

The Fiduciary Committee

While it is perhaps possible to avoid even residual fiduciary responsibility on the part of a board of directors—a plan could, for example, designate a fiduciary committee as the named fiduciary by its terms—few plans attempt this. A more common approach is for a plan to designate (say, in a basic plan document) the plan sponsor as the named fiduciary unless otherwise specified in the corresponding adoption agreement. Under the default rule, the board of directors (of a corporation) or the managers (of an LLC) or the partners (in a partnership) are the named fiduciaries.

With proper planning and documentation it is possible to ensure that an organization's board of directors or managers, as the case may be, has only residual "duty-to-monitor" duties by having the board or members formally vote to establish the fiduciary committee, which does not include board members. It is also possible to ensure that a company's senior managers have no fiduciary duties by excluding them from committee participation and otherwise ensuring that they keep their distance from plan maintenance and operation.

As a rule of thumb, individuals with no substantive knowledge of retirement plans should not be given substantive fiduciary responsibilities. In the event of litigation, it's easy to impeach or at least embarrass such an individual by exposing their lack of substantive knowledge. This is the lesson of Tittle v. Enron. It is for this reason that, in the absence of special knowledge or expertise, board members or organization managers should not participate on fiduciary committees. In the contexts of a lawsuit or investigation, it is one thing to ask a board member about the substance of his or her day-to-day actions as a fiduciary; it is quite another thing to ask him or her about his or her proper oversight of others.

What happens when there is no formal grant of authority to a fiduciary committee from the board or members? Such a committee is certainly a functional fiduciary with respect to the things that it does for the plan. This would include, for example, curating the plan's investment menu. But—and this is the problem—the board or members have retained full-blown fiduciary status, which is not what is intended in most cases.

Appointing the Fiduciary Committee, the Right Way

Plan sponsors ought to start with a clear intention concerning the purpose for and role of their fiduciary committee, which in most cases is for the committee to be the ERISA-named fiduciary and to be responsible for ongoing plan administration. (In larger companies, these duties may be divided up among a fiduciary committee, an investment committee and even a "settlor" committee.) However apportioned, the stakes are high. Fiduciary liability is personal liability; remedies for a breach of fiduciary duties include restoration of losses, disgorgement of profits, or other equitable relief (such as removal of the fiduciary). Committee participation thus should not be taken lightly. Fulsome, periodic, properly documented fiduciary training for committee members is non-negotiable. Plan sponsors should also indemnify committee members for their service in the ordinary course, and obtain ERISA fiduciary insurance (which is in addition to and not to be confused with an ERISA fidelity bond).

There should also be a formal vote of the board or LLC members establishing or ratifying the committee, adopting a charter, appointing committee members (ex officio, by name or a combination of the two), and adopting any necessary plan amendments. As a prophylactic, the board or LLC members might also ratify the past actions of an ongoing committee. Once done, the appointing fiduciaries have a duty to monitor the committee actions. This duty can be satisfied by having the committee report to the board or managers, as the case may be, at least annually and more often in special circumstances. Many committees do this using a brief PowerPoint presentation listing the committee's projects and accomplishments during the course of the reporting period, e.g., moved x funds to the watch list, swapped out y funds for performance failures, conducted a participant education program, etc.


While it's not clear how widespread the problem of failing to properly establish a fiduciary committees is, we suspect that it is not trivial. These failures carry with them unnecessary risks. Proper compliance is within reach.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions