A retirement plan sponsor’s Payroll Clerk went on vacation. The company controller instructed the Payroll Clerk to teach the Accounts Payable Clerk how to run payroll and make remittances, including all benefit withholdings. The Accounts Payable Clerk ran payroll, remitted all tax withholdings and benefit withholdings, except the 401(k) deferrals. He decided to let the Payroll Clerk remit the 401(k) deferrals when she returned from her two-week vacation.

Over the past several years, regulators and others have made a plethora of attempts to define in detail the retirement plan fiduciary. Regardless of these attempts, the retirement plan fiduciary ordinarily falls into one of three categories: 

• The Named Fiduciary

• The Appointed Fiduciary

• The Accidental Fiduciary 

ERISA (the Employee Retirement Income Security Act of 1974, as amended) requires every qualified retirement plan to have at least one Named Fiduciary. The governing plan document identifies the Named Fiduciary. While any person can be the Named Fiduciary, most often the Plan Document identifies the employer as the Named Fiduciary. The Named Fiduciary bears the responsibility for the Plan’s operation and overall adherence to the rules and regulations governing the plan, including but not limited to ERISA, the Internal Revenue Code, and their regulations.

The named fiduciary may, at its discretion, appoint others to act as a fiduciary. Examples of Appointed Fiduciaries include discretionary trustees, an ERISA 3(38) investment manager, an ERISA 3(16) plan administrator specifically acting in a fiduciary capacity. The Appointed Fiduciary is usually bound by written contract and acknowledges in writing its role as a fiduciary to the plan.

The Accidental Fiduciary is the most unique fiduciary. Neither named nor appointed, the accidental fiduciary finds itself acting in a fiduciary capacity, sometimes unintentionally. The accidental fiduciary can be defined as someone who makes a decision or exercises some type of control over the plan assets without the expressed authority to do so. 

In the opening paragraph, the Accounts Payable Clerk consciously and purposely did not follow the controller’s directive to timely remit employee 401(k) deferrals. The Accounts Payable Clerk became an Accidental Fiduciary by effectively controlling plan assets (the deferrals in this case) and not timely remitting them to the appropriate service provider.

Who are the fiduciaries to your plan?

     HORAN Wealth is the marketing name of HORAN Securities, Inc. (“HSI”) and HORAN Capital Advisors, LLC (“HCA”). HORAN Wealth Management (“HWM”) is the associated investment advisory firm. HCA is an affiliated investment advisory firm. Both HWM and HCA are SEC registered investment advisory firms.