Am I a “Fiduciary”?

Due to the recent enactment of the DOL Fiduciary Rule and a lot of back and forth on possible implementation delays, the term “fiduciary” has been very prominent in the news.  The Rule began its phase-in on June 9, 2017.  Whether or not there will be significant changes from its current state is unclear.  The good news is that financial advisors, broker dealers and investment platforms have been gearing up for this ruling for a long time.

In the broadest context, the DOL Fiduciary Rule requires investment advisors to act in the best interests of their clients.  While prior to the ruling Fiduciarysome fee based financial advisors were already signing on as either a co-fiduciary or taking on the fiduciary liability, commission based advisors are now being held to a higher level of accountability for the advice they render.  It is important to note that just because an advisor has not acted as a fiduciary, does not mean that they do not act in the client’s best interest.

Investment Advisors are not the only type of retirement plan fiduciary.  ERISA defines a retirement plan fiduciary as a person or entity that does any of the following with respect to a retirement plan:

  • Exercises discretionary control or authority over the management of the plan or its assets
  • Provides investment advice or manages the plan assets for a fee
  • Has discretionary responsibility in the administration of the plan
  • Is specifically identified in the written plan document as a fiduciary

Record-keepers, third party administrators and actuaries are generally not considered fiduciaries when acting solely in their professional capacity.   The employees of an employer who provide census data or do other ministerial tasks are not typically fiduciaries.  The Plan Sponsor (usually the employer), board of directors, corporate officers, Trustees and individuals who select committee officials are all considered fiduciaries.

Plan Sponsors may be able to reduce their liability by outsourcing some of their fiduciary duties while continuing to select and monitor their fiduciaries.  Investment monitoring and selection may also be outsourced to either a 3(21) co-fiduciary or 3(38) fiduciaries.  Some plan administration fiduciary duties may be outsourced to 3(16) fiduciaries.