A plan must have at least one Fiduciary, typically the employer. However, anyone else making key decisions for an ERISA plan can also be considered a Fiduciary.
Fiduciaries are subject to standards of conduct since they act on behalf of the plan participants. These responsibilities include:
Acting solely in the interest of plan participants and their beneficiaries with the exclusive purpose of providing them with benefits
Carrying out their duties prudently
Diversifying plan investments
Only selecting plans with reasonable expenses
Acting as a Fiduciary requires expertise in a variety of areas. Lacking that expertise, an employer will want to hire a service provider with the professional knowledge to carry out these functions.
With these fiduciary responsibilities, there is also a potential for personal liability for the employer. The liability can be limited in certain situations either by documenting the processes used to carry out the fiduciary responsibilities or by giving the participants control over the investments in their accounts as well as the ability to choose from a broad range of investment options.
Those who handle plan funds or other plan properties must generally be covered by a fidelity bond.
FEES AND EXPENSES
Fees are just one other factor Fiduciaries need to consider when selecting service providers and plan investments. When fees for services are paid out of plan assets, Fiduciaries will want to understand the fees and expenses charged in relation to services provided. While the law does not specify a permissible level of fees, it does require that fees charged to a plan must be “reasonable.” It is the Fiduciary’s responsibility to ensure that these fees are reasonable both at inception and in later years. After careful evaluation during the initial selection, the plan’s fees and expenses should be monitored to determine whether they continue to be reasonable.