A Fiduciary is obligated to choose and monitor the plan’s assets with the participants’ best interest as a priority. A Fiduciary typically includes the key decision makers of the plan sponsor. A Fiduciary may also include a Financial Advisor, record keeper or retirement plan consultant.

A Fiduciary’s personal assets are at risk with regard to their responsibilities to the plan.

It is important that a Fiduciary concern themselves with how the assets are invested and to assure that the choice of service provider is not influenced by other business decisions. An example of violating this requirement is when your lender offers to reduce your interest rate if you place your retirement plan services with the lender. This is a clear violation of fiduciary obligations.

To avoid these types of conflict, a plan sponsor should solicit service provider bids at least every three years. Afterwards, a plan sponsor should compare their current plan with the bids to see if the current plan offers comparable investment choices and services. The plan sponsor should also consider costs when examining the plan offerings.

The DOL and IRS offer a couple of ways to help protect fiduciaries from possible lawsuits.

404(c) – This refers to the DOL ERISA code section that protects fiduciaries if they meet certain requirements.

Here is a highlight of such requirements:

  • Designate a fiduciary
  • Provide notice to participant of plan’s intentions to satisfy 404(c)
  • Offer a broad range of investments (minimum of 3)
  • Allow a reasonable frequency of investment direction changes
  • Provide participant with prospectuses, fees, expenses and any other information provided by investment fund


A trustee is a fiduciary responsible for the activity (i.e. distributions and contributions) of the trust.

There are two types of trustees:

  • Discretionary Trustee- This type of trustee has limited authority and merely takes orders from the Plan Sponsor or Directed Trustee.
  • Directed Trustee – Has full authority to request distributions and make choices regarding investment options

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