What is a fiduciary, and what are "fiduciary responsibilities" under an ERISA-covered plan?

A fiduciary is a person or entity with the discretionary authority to control and manage the operation and administration of a benefit plan covered by the Employee Retirement Income Security Act (ERISA). ERISA establishes minimum standards for retirement, health and other welfare benefit plans and sets the standards of conduct for fiduciaries; therefore, it is critical that employers understand their responsibilities under this law.

Fiduciaries are subject to standards of conduct because they act on behalf of participants in an employer-sponsored plan and their beneficiaries. Fiduciary responsibilities under an ERISA-covered plan include:

• Acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them.
• Carrying out their duties prudently.
• Following the plan documents (unless inconsistent with ERISA).
  
• Diversifying plan investments.
  
• Paying only reasonable plan expenses. 
  

The duty to act prudently is a key fiduciary responsibility and requires expertise in a variety of areas. Employers should ensure that persons entrusted with fiduciary duties have the professional knowledge to carry out those functions.

Following the terms of the plan document also is an important responsibility as the plan document is the foundation for plan operations. An employer must be familiar with its plan document and should periodically review it to ensure that it remains current.

Understanding and complying with the fiduciary responsibilities is critical as failure to follow the fiduciary standards of conduct may result in personal liability. The Department of Labor (DOL) publication Understanding Your Fiduciary Responsibilities Under a Group Health Plan provides helpful information for employers seeking more information about this topic. You may also wish to use their ERISA Fiduciary Advisor.