In every retirement plan, there are individuals or groups of people who use
their own judgment or discretion in administering and managing the plan or who
have the power to or actually control the plan’s assets. These individuals or
groups are called plan fiduciaries. Fiduciary status is based on the functions
that the person performs for the plan, not just the person’s title.
Does your plan have to identify those responsible for operating the plan?
A plan must name at least one fiduciary in the written plan document, or through
a process described in the plan, as having control over the plan’s operations.
This fiduciary can be identified by office or by name. For some plans, it may be
an administrative committee or the company’s board of directors. Usually, a
plan’s fiduciaries will include the trustee, investment managers, and the plan
administrator. The plan administrator is usually the best starting point for
questions you might have about the plan.
What are the responsibilities of plan fiduciaries?
Fiduciaries have important responsibilities and are subject to certain standards
of conduct because they act on behalf of the participants in the plan. These
Acting solely in the interest of plan participants and their beneficiaries, with
the exclusive purpose of providing benefits to them
Carrying out their duties with skill, prudence, and diligence
Following the plan documents (unless inconsistent with ERISA)
Diversifying plan investments
Paying only reasonable expenses of administering the plan and investing its
Avoiding conflicts of interest.
The fiduciary also is responsible for selecting the investment providers and the
investment options, and for monitoring their performance. Some plans, such as
most 401k or profit sharing plans, can be set up to permit participants to
choose the investments in their accounts (within certain investment options
provided by the plan). If the plan is properly set up to give participants
control over their investments, then the fiduciary is not liable for losses
resulting from the participant’s investment decisions. Department of Labor rules
provide guidance designed to make sure participants have sufficient information
on the specifics of their investment options so they can make informed
decisions. This information includes:
A description of each investment option, including the investment goals, risk,
and return characteristics
Information about any designated investment managers
An explanation of when and how to request changes in investments, plus any
restrictions on when you can change investments
A statement of the fees that may be charged to your account when you change
investment options or buy and sell investments
The name, address, and telephone number of the
plan fiduciary or other person
designated to provide certain additional information on request.
A statement that the plan is intended to follow the Department of Labor rules
and that the fiduciaries may be relieved of liability for losses that are the
direct and necessary result of a participant’s investment instructions also must
What if a plan fiduciary fails to carry out its responsibilities?
Fiduciaries that do not follow the required standards of conduct may be
personally liable. If the plan lost money because of a breach of their duties,
fiduciaries would have to restore those losses, or any profits received through
their improper actions. For example, if an employer did not forward
participants’ 401k contributions to the plan, they will have to pay back the
contributions to the plan as well as any lost earnings, and return any profits
they improperly received. Fiduciaries also can be removed from their positions
as fiduciaries if they fail to follow the standards of conduct.
When does the employer need to deposit employee contributions in the plan?
If you contribute to your retirement plan through deductions from your paycheck,
then the employer must follow certain rules to make sure that it deposits the
contributions in a timely manner. The law says that the employer must deposit
participant contributions as soon as it is reasonably possible to separate them
from the company’s assets, but no later than the 15th business day of the month
following the payday. In the Annual Report (Form 5500), the plan administrator
is required to include information on whether deposits of contributions were
made on a timely basis. For more information, see the Department of Labor’s Ten
Warnings Signs That Your 401k Contributions Are Being Misused at
www.dol.gov/ebsa for indicators of possible delays in depositing contributions.
What are the plan fiduciaries’ obligations regarding the fees and expenses
paid by the plan? Can the plan charge my defined contribution plan account for
Plan fiduciaries have a specific obligation to consider the fees and expenses
paid by your plan for its operations. ERISA’s fiduciary standards, discussed
above, mean that fiduciaries must establish a prudent process for selecting
investment alternatives and service providers to the plan; ensure that fees paid
to service providers and other expenses of the plan are reasonable in light of
the level and quality of services provided; select investment alternatives that
are prudent and adequately diversified; and monitor investment alternatives and
service providers once selected to see that they continue to be appropriate
The plan may deduct fees from your defined contribution plan account. Plan
administration fees and investment fees can be deducted from your account either
as a direct charge or indirectly as a reduction of your account’s investment
returns. Fees for individual services, such as for processing a loan from the
plan or a Qualified Domestic Relations Order, also may be charged to your
If you have any questions about the management of the plan and its assets,
contact your plan administrator.