Alliance Bernstein recently released the shocking result of a survey it had taken of plan sponsors: a
whopping 37% of those fiduciaries surveyed
didn't know that they were fiduciaries.
Obviously, it is unlikely that these individuals are fulfilling
their fiduciary responsibilities if they are unaware of their
status. And we wonder what will happen if the plans of these
oblivious fiduciaries are selected for a Department of Labor audit,
though we are sure that it won't be a pretty picture.
It is possible to be an ERISA fiduciary and not know it, because
no acknowledgement of fiduciary status is required. ERISA has a
functional definition of fiduciary, which means that you become a
fiduciary based on what you do. Administration, investment control
and giving investment advice for a fee are the activities that
trigger fiduciary status. ERISA also provides that there must
always be at least one named fiduciary to manage a plan, and this
will be the Company and its directors if no other designation is
Another form of ignorance can complicate this problem, because
it is also possible to believe that your plan service providers are
fiduciaries when they are not. Small plan fiduciaries are not the
only ones under these misconceptions. Misplaced reliance on what
these non-fiduciary vendors are doing can result in avoidable
compliance failures and litigation exposure. Here is a short
checklist for people who have relationships with employee benefit
If you are a director, you have some
fiduciary responsibilities even if the board has delegated
authority to other fiduciaries.
If you are a plan trustee, you are a
If you are on a plan committee,
including an investment or administrative committee, you are a
If you have adopted a prototype or
other pre-approved plan, your vendor is not a fiduciary unless it
has agreed to make decisions and become an administrator as defined
in Section 3(16) of ERISA or manages investments.
If you have appointed an investment
manager with the authority to make investment decisions, the
investment manager is a fiduciary.
If you are receiving investment
advice from a broker or registered investment adviser, you may not
be receiving advice from an ERISA fiduciary as the law stands now.
It all depends on factors such as whether the advice is one-time or
on a regular basis, or is given with the understanding that it will
be a primary basis for plan investment decisions. The Department of
Labor, with the support of the Obama administration, has been
working on a controversial new proposal to extend ERISA fiduciary
responsibilities to brokers and others who provide investment
advice to plans, but so far, is being close-mouthed about what it
Since fiduciaries may be personally liable for losses caused by
fiduciary breaches, knowing whether you and your vendors are
fiduciaries is essential self-defense against being blind-sided in
the pocketbook by a court award, audit penalty or settlement.
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.
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).