Retirement Meditation #48: Who is an Appointed Fiduciary?
By: Paul Carl
“Marty” is a new member of his company’s retirement plan committee. While he’s generally familiar with retirement plans, this is his first time on an oversight committee. He’s been reading about the function of a retirement committee, the committee members’ roles and responsibilities, and the expectations under ERISA. He’s the last to enter the conference room and notices several unfamiliar faces. As Marty sits, he loudly asks, “Who’s the Appointed Fiduciary sitting with us today?”
Traditionally, fiduciaries have been categorized in one of three ways: Named, Appointed, and Accidental. The Named Fiduciary is named in the governing plan document and often has the primary responsibility for managing and controlling the Plan. The Accidental Fiduciary is someone who exercises individual discretion over some aspect of the plan or its assets, maybe unintentionally. The Appointed Fiduciary is hired as a fiduciary to the plan and works pursuant to some type of service agreement.
Typical appointed fiduciaries include investment advisors serving in an ERISA 3(21) capacity or as an ERISA 3(38) investment manager, trust companies serving as discretionary trustee, and some third-party administrators delivering services as a fiduciary under ERISA 3(16). There exists certain commonality among appointed fiduciaries. The appointed fiduciary will be under contract with the Plan and must acknowledge in writing their fiduciary, or co-fiduciary, status. The appointed fiduciary ordinarily is responsible for only that part of the plan for which they’ve been hired to deliver services. An investment advisor or investment manager is responsible for investments. The trust company serving in a discretionary capacity is responsible for holding assets, transacting based on information it’s been given, and managing at least a portion of those assets. The TPA servicing the plan as a 3(16) fiduciary may be responsible for a limited scope or full-scope of services including all compliance and reporting. In each case, the contract will detail the terms of the role of the appointed fiduciary.
In the opening paragraph, Marty is quickly determining who, if anyone, attending the committee meeting is an investment advisor or manager, discretionary trustee, or TPA serving in some type of limited or full fiduciary service capacity. Understanding who is on the committee and who is attending as a non-committee member serving the plan is a best practice. A further best practice would be for Marty to read the appointed fiduciaries contracts to better align his judgement of their services with their stated responsibilities.
Who are your appointed fiduciaries?
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