Solving the fiduciary riddle in retirement plans

The retirement plan industry is rapidly evolving, driven largely by recent revisions to regulations.

As a result, many plan sponsors have grown more conscious of their fiduciary responsibilities and are increasingly turning to others – including advisers – for help, especially when selecting and monitoring their retirement plan’s investment lineup.

Fees, roles under microscope

Conversations among advisers and employers are likely to change as much by new fee-disclosure regulations (implemented in 2012) as they are by anticipated revisions to existing regulations that could redefine who is (and isn’t) a fiduciary.

Although service providers and plan sponsors might have shared some fee and service details previously, the new fee-disclosure regulations are explicit about what must be shared and, to facilitate comparisons, the format that must be used.

Service providers re required by new regulations (under Section 408(b)(2) of ERISA) to disclose to plan fiduciaries (generally the plan sponsor) details about the services they provide and the fees they charge whether they are acting as a plan fiduciary.

Plan fiduciaries are required by new regulations (under Section 404(a)(5) of ERISA) to disclose to plan participants and beneficiaries details about the fees paid either directly (from plan assets) or indirectly (through the plan investments).

Additionally, the Department of Labor has been redrawing the line between fiduciary and nonfiduciary advisers.

To be, or not to be (a fiduciary)

For plan sponsors, the importance of meeting their fiduciary responsibilities are asking others for assistance. Many plan sponsors are turning to their advisers to co-fiduciary with them in selecting and monitoring plan investments. A plan sponsor should ask their adviser if they are acting as a third party fiduciary either as a 3(21) or 3(38) capacity. The difference between the two in a nutshell is providers who offer these services are considered “investment advisers” and, as such, act as fiduciaries. They typically serve in one of two capacities: a nondiscretionary investment adviser, which makes recommendations, but the sponsor must make the decisions and approve the recommended changes, or a discretionary investment manager, which has full discretion and thus serves as the final authority over the plan investment decisions.

In either case, it’s important to note that the named fiduciary – typically the plan sponsor or an investment committee – is never completely relieved of fiduciary responsibility. Choosing a fiduciary is, in itself, a fiduciary act that requires prudent selection, monitoring and evaluation of services provided and the fees paid for them.

Fiduciary coverage

Generally, their-party fiduciary services indemnify the plan for losses (including reasonable attorney’s fees) attributable to a breach of fiduciary duty. For example, if investment recommendations are deemed to be imprudent, financial judgments against the plan would be covered. These services, however, won’t indemnify the plan for judgments against platforms, plan operations, fees, participant education, qualified default investment alternatives and participant notifications.

Because the Department of Labor and IRS have employed thousands of new agents to perform audits on 401(k) plans, we feel it would behoove plan sponsors to partner with a financial adviser who is capable to co-fiduciary as a 3(21) or 3(38). The adviser should also provide the plan sponsor with an Investment Policy Statement, which lays out clearly and concisely how often and when investments are reviewed, a criteria for keeping or removal of fund or funds from current  lineup.

This is just one of many purposes an IPS can facilitate. We believe a sponsor should ask their provider and adviser whether they co-fiduciary and in what capacity. The plan sponsor/fiduciary needs to educate themself as to their duties, as well as their personal liability.

• Terry Maryniw and Aaron Maryniw are investment advisers with Maryniw Financial, 910 E. Oak St., Lake in the Hills. Email them at, call 847-658-9251, or visit

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