• Acting solely in the interest of plan participants (your current and former employees who have money in your 401k plan) and their beneficiaries, with the single purpose of providing benefits to them. 
• Carrying out duties prudently
• Following the terms of the plan document
• Making sure that the plan’s investment options are diversified
• Paying only necessary and reasonable expenses for administering the plan

There are two types of fiduciaries: 

1) Named fiduciaries are those who have been specifically designated by the plan, such as the plan administrator, trustee, or members of the investment committee.

2) Functional fiduciaries become such based on their job duties.  For example, if an employee has decision making authority over the administration of the plan or the plan’s assets, but not a specific named fiduciary, they are a functional fiduciary. 

The key to determining who is and is not a fiduciary is whether the person exercises discretion and control over the plan administration or assets.  For example, an assistant who is simply carrying out clerical duties such as sending out enrollment packets or submitting a participant’s account change request on their behalf would not be a fiduciary.

Fiduciaries are held legally accountable for their actions involving plan administration. If they fail to perform duties or violate plan procedures, they can be held personally responsible for restoring plan losses.  A plan participant, a government agency such as the DOL, or even another fiduciary can bring a lawsuit against them.  The fact that the fiduciary did not know the law, or did not know they were a fiduciary, is not a defense.  That’s why it is so important to clearly define who is a fiduciary within the company, and make your fiduciaries aware of their responsibilities. 

You can reduce fiduciary liability by thoroughly documenting all decisions and actions taken regarding plan administration and movement of assets, including investment decisions.  If you do not have an investment expert on staff, an investment advisor can be hired.  Although the employer is responsible for selecting the investment advisor, it would not be liable for the individual investment decisions of the advisor.  Fiduciary liability insurance can also be purchased by your company to help protect your employees who are fiduciaries.  Your business insurance agent can provide you with information about this type of policy. 

Although the rules for fiduciary standards may seem complex, it boils down to common sense and good business practices.  Any action taken by a fiduciary must be in the interest of the plan participants, and not carelessly or for their own personal gain.

For further information, see the DOL’s informative publication Meeting Your Fiduciary Responsibilities.

The DOL also has an ERISA Fiduciary Advisor quiz to help you determine if your plan is covered by ERISA and provide guidance in your fiduciary responsibilities.