Fiduciary Education
Who is actually responsible for your retirement plan — and what that responsibility requires in practice. Plain-English education on ERISA fiduciary roles, the duties that attach to them, and the difference between advice and accountability.
Most retirement-plan problems are not investment problems. They are governance problems: nobody was clearly named, nobody documented the decision, and nobody was watching the operational calendar. ERISA does not care how busy your HR team is — it asks who the fiduciary was, what process they followed, and whether they can prove it.
The pages below explain each fiduciary role, what it covers, what it does not cover, and where the residual liability lands on the employer.
The fiduciary roles, side by side
| Role | What it covers | What stays with the employer |
|---|---|---|
| 3(16) Plan Administrator | Day-to-day plan administration: notices, distributions, eligibility determinations, Form 5500 signing, participant communications, operational compliance. | Selecting and monitoring the 3(16), and funding the plan. |
| 3(38) Investment Manager | Discretionary authority to select, monitor and replace plan investments — the fiduciary decision on the lineup itself. | Prudent selection and ongoing monitoring of the 3(38). |
| 3(21) Investment Advisor | Recommendations only. The advisor advises; the employer still decides and still owns the decision. | Every investment decision, plus documentation of why it was made. |
| 402(a) Named Fiduciary | The top-level named fiduciary identified in the plan document with authority to control and manage plan operation and administration. | Appointment and monitoring — but the operational buck moves off the employer. |
| 403(a)(1) Trustee | Holding and managing plan assets in trust, subject to direction under the plan document. | Ensuring assets are properly held and timely remitted. |
The distinction that matters: a 3(21) advisor recommends. A 3(38) decides on investments. A 3(16) and 402(a) take responsibility for running the plan. Outsourcing the title without outsourcing the discretion leaves the liability exactly where it was.
The four core ERISA duties
- Duty of loyalty — act solely in the interest of participants and beneficiaries, for the exclusive purpose of providing benefits and defraying reasonable expenses. Corporate convenience is not a permissible tiebreaker.
- Duty of prudence — the “prudent expert” standard. Courts examine the process, not the outcome. A good result from a sloppy process is still a breach exposure.
- Duty to diversify — minimize the risk of large losses unless it is clearly prudent not to.
- Duty to follow plan documents — operate the plan the way the document says, and amend the document when practice changes. Operational failures most often start here.
Where plan sponsors get into trouble
Late deposits of employee deferrals
Reported permanently on Form 5500 Line 4a, where DOL, auditors and plaintiff firms can all see it. It is one of the most common triggers of an EBSA inquiry — and one of the easiest to prevent with a documented remittance calendar.
Fees that were never benchmarked
ERISA does not require the cheapest plan. It requires a prudent, documented process for determining that fees are reasonable for the services received. “We’ve always used them” is not a process.
No committee, no charter, no minutes
When there is no documentation, the sponsor loses the argument about process before the facts are even reached. A committee charter, a meeting cadence and written minutes are the cheapest fiduciary insurance available.
Misapplied definition of compensation
Bonuses, commissions and fringe items excluded in practice but included in the document create a qualification defect that compounds every payroll cycle until it is found.
Unmonitored service providers
Selecting a recordkeeper is a fiduciary act. So is failing to monitor one. 408(b)(2) fee disclosures should be collected, read and filed — annually.
Missing participants and stale data
Uncashed checks and unlocatable former employees are an ongoing fiduciary obligation, not a clerical annoyance. Document your search steps.
Questions we get most often
Can we outsource fiduciary liability entirely?
No. A plan sponsor always retains the duty to prudently select and monitor whoever it appoints. What a properly executed 3(16)/402(a) structure does is move the operational and administrative fiduciary responsibility — and the day-to-day decisions that generate most exposure — to a party that accepts it in writing.
Does our advisor already handle this?
Usually not. Most advisors serve as 3(21) — they recommend, you decide. Read your service agreement: if it does not name a section of ERISA and accept fiduciary status for it, it is not doing what you think it is doing.
Do small plans really get sued?
The headline excessive-fee cases involve large plans, but DOL enforcement is size-agnostic and is driven heavily by Form 5500 data and participant complaints. Late deposits and missed notices are small-plan problems.
How do we prove prudence?
Contemporaneous documentation: committee minutes, benchmarking reports, fee disclosures, investment policy statement, and a record of what you reviewed and decided — dated. If it is not written down, it is very difficult to establish later.
Not sure which fiduciary roles your plan actually has covered?
We will read your plan document and service agreements and tell you plainly which ERISA roles are named, which are unfilled, and what is still sitting on the employer.
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