June 7, 2018

Fiduciary Responsibility, Despite the Chaos (article)

Fiduciary responsibility is one of the most important aspects for individuals engaged in welfare and qualified pension benefits plan sponsorship. A fiduciary is one who exercises discretionary authority or control regarding management of the plan, as well as disposition of plan assets.  Certain positions in administering or managing a plan are always fiduciary roles, such as a named fiduciary or specific person, entity or corporation designated in the plan document, or an investment plan committee. 

Generally, with the exception of named fiduciaries, fiduciary status is a functional test based on the role the individual plays in conjunction with the plan.  To this end, over the recent years and as discussed in prior Benefit Beat and At Issue articles, much ado has been made about the fiduciary status of investment advisers. 

Most recently, in response to the Fifth Circuit Court of Appeals decision to vacate the Department of Labor’s Employee Benefits Security Administration (EBSA) fiduciary investment advice rules (see Fiduciary Rules Vacated, Benefit Beat, 4/5/18), the DOL issued Field Assistance Bulletin (FAB) 2018-02 on May 7, 2018.  This FAB suggests that as long as a fiduciary is working diligently and in good faith to comply with the law, neither the Department of Labor nor the Internal Revenue Service will take corrective action against the fiduciary.  What this means is that given the revocation of the investment advice rules, the path to future rulemaking is uncertain. 

Similarly, the Securities and Exchange Commission (SEC) recently issued proposed regulations addressing fiduciary standards for investment advisers.  More will be said about these regulations if and when they are finalized. 

The state of chaos notwithstanding, it is important to be reminded of fiduciary responsibility.  Specifically, a plan fiduciary must have undivided loyalty in its role, and act solely in the best interest of plan participants and beneficiaries.  Further, a fiduciary can only use plan assets for the exclusive purpose of providing benefits for participants and beneficiaries and to pay reasonable expenses of plan administration.  Where applicable, the fiduciary must diversify investments related to the plan.  And finally, the fiduciary must follow the terms of the plan, unless it the plan is inconsistent with the law.  This obligation extends to oversight of plan operation, correction of plan errors, satisfying reporting and disclosure requirements, and maintaining a solid record retention process.

It is also important to carry out these duties with the utmost attention to detail given the high standard imposed on a plan fiduciary.


The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein. 

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