Who is a fiduciary?

As protection for employee benefit plan participants and beneficiaries, ERISA sets forth standards of conduct, responsibility, and obligations for fiduciaries and plan administrators. Every employee benefits plan must have a written instrument naming one of more fiduciaries who jointly or severally have the authority to control and manage the plan's operation and administration.

A person is a fiduciary with regard to an employee benefit plan if that person:

1. exercises any discretionary authority or control over plan management or over the management or disposition of plan assets;
2. renders (or has the authority or responsibility to render) any investment advice for a fee or other compensation as to any plan monies or property; or
3. has discretionary authority or responsibility for plan administration.

Formal appointment is not necessary, according to one court, and a person may be regarded as a fiduciary by giving the impression, as by signing documents, that they are a fiduciary.

Some persons are barred. A person who has been convicted of certain crimes listed in ERISA (such as bribery, extortion, embezzlement, or fraud) or imprisoned due to the conviction is not allowed to serve as an employee benefit plan fiduciary, administrator, trustee, custodian, counsel, agent, consultants, or representative or decisionmaker for 13 years.

The penalty for violating this prohibition against fiduciary service in the case of criminal convictions or imprisonment is a fine of up to $10,000 and/or up to five years in prison.

Reprinted with permission. © CCH