Who is a Fiduciary? Current Definitions and a Proposed Update

Larry Beebe, CPA

Fiduciaries have the ultimate responsibility for an employee benefit plan.  A fiduciary is any person who:

  • Exercises control over plan assets
  • Provides investment advice to the plan
  • Has responsibility for the administration of the plan

The Trustees of an employee benefit plan are fiduciaries as is the plan administrator and the plan’s investment advisors.  Professional service advisors such as independent auditors, actuaries and attorneys are normally not fiduciaries.

A fiduciary must:

  • Act solely in the interest of plan participants and beneficiaries
  • Use plan assets exclusively to pay benefits and reasonable plan expenses
  • Diversify plan investments
  • Act in accordance with plan documents
  • Act prudently

There are certain transactions between a plan and a fiduciary that are prohibited.  In addition to the transactions prohibited to a party-in-interest, the following are prohibited to plan fiduciaries:

  • Dealing with plan assets in their own interest
  • Acting on behalf of a party with interests contrary to those of the plan
  • Receiving any consideration for their personal account in connection with plan asset transactions

The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) is revising the rule on the definition of a fiduciary.  The new rule is expected to be issued in early 2012.  For more information and anticipated revisions, visit EBSA’s website and continue to check our blog for regular updates.

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