Who is a Fiduciary?
Congress intended the definition of fiduciary to be broadly construed, so you should never assume that because
you are not listed as a trustee you are not a fiduciary. The definition of fiduciary is functional in nature.
Someone does not need to be formally listed in any legal documentation as being a fiduciary, if he or she acts in such a way
as to exercise the requisite discretion over the plan or its investments. In addition to functional fiduciaries there
are also “named fiduciaries” under Employee Retirement Income Security Act (ERISA) whether or not they actually act with respect to the plan.
Why is fiduciary status so important?
Fiduciaries of an employee benefit plan are charged with carrying out their duties prudently and solely in the
interest of the participants and beneficiaries of the plan, and a fiduciary that is found to have breached his or
her duties under ERISA is personally liable for any losses caused to the plan
participants by the breach (ERISA 409).
In our opinion, the retirement plan industry has done a poor job of educating plan fiduciaries to the significance of these inherent risks. The industry is focused on providing a product of their creation instead of a service designed in the best interest of the fiduciaries and the plan participants.
The Enron events and its fallout underscore the important role that fiduciaries play in protecting participant interest in retirement plans. We believe these events are likely to lead to the creation of “new” fiduciary standards under ERISA. There are already signs of change particularly in the interpretation of ERISA’s fiduciary rules. In most cases, large plans are staffed by professional fiduciaries. However, the small to midsize market, (start-up plans to approximately $50 million), are traditionally not aware of their responsibilities or the magnitude of overlooking them. The Department of Labor is well aware of this reality and they are focusing their attention on small to mid-sized plans. This is due to the greater likelihood of noncompliance or breaches of fiduciary responsibilities.
The perfect solution—a co-fiduciary relationship with your advisor.
Premier Financial Group is a co-fiduciary with its clients; therefore, our firm is in complete alignment with the plan fiduciaries and plan participants. This valuable co-fiduciary relationship is a way for you to manage your fiduciary responsibilities and to reduce the risks and potential liabilities. Our question to you is, “Why would a trustee accept anything less?”
Due to this alignment with our clients and our shared exposure to potential liabilities, Premier always assumes that there will be a time when all of the decisions and procedures in the management of a retirement plan will be examined and scrutinized in detail.
Bad results bring about lawsuits. Nonetheless it is the decision making process that led to those results that is examined by the adverse party and the court to determine if there is fiduciary liability. Because of this fact, Premier Financial Group has committed significant resources in developing our proprietary formalized documentation process. This process forms the foundation of our partnership with our select group of clients.
Premier Financial Group provides all its valued retirement plan clients with a clear and concise co-fiduciary agreement. This confidential agreement supersedes any/all written copy implied or contained in this website.
Next Chapter: Co-Fiduciary Relationship
