Solving an Employer's Fiduciary Dilemma: Liability, Discretion and the Role of the Qualified Plan Advisor

Swisher, Pete
February 2004
Journal of Financial Planning;Feb2004, Vol. 17 Issue 2, p42
Academic Journal
Small- and mid-size business owners often fail to understand their fiduciary obligations when offering retirement plans to their employees in the U.S. A financial advisor serving as a fiduciary consultant can educate the employer and clarify the fiduciary obligations of all involved. Executives making decisions regarding employee retirement plans are by definition fiduciaries, and personally liable for the management of those plans. From the standpoint of the plan sponsor, the ideal situation is for all plan providers to accept fiduciary responsibility even if they are not required by law to do so. An advisor to a qualified plan might provide the following services to a plan sponsor: conducting vendor searches, establishing criteria for due diligence, implementing a program of fiduciary monitoring and ensuring that investments are promptly replaced when they fail to meet the established criteria. Risks can be classified as: reduced, retained, avoided and transferred. Fiduciary liability revolves around the use of discretion to buy and sell assets and manage the plan. Co-fiduciaries who do not accept discretion may, in fact, accept very little liability. It is a myth that fiduciary responsibility cannot be delegated. Named fiduciaries are not liable for the acts and omissions of other named fiduciaries if properly delegated.


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