| Read Time: 3 minutes | Breach of Fiduciary Duty
What Are Fiduciary Responsibilities under ERISA

Individuals create estate plans to help secure their family’s future after they’ve departed. Often, when planning, questions about employer-sponsored retirement plans arise. When you enroll in an employer-sponsored retirement plan, you designate beneficiaries and trust that your employer and investment company will do the right thing regarding your investments.These plans must be managed by fiduciaries for the benefit of you and your named beneficiaries.

Fortunately, the Employee Retired Income Security Act of 1974 (ERISA) strengthens a plan participant’s rights. It also holds employers and investment professionals to high standards. You may be wondering, What is an ERISA plan fiduciary and what are fiduciary responsibilities under ERISA? The skilled Texas estate attorneys at Robbins Estate Law, explain the basics of ERISA below. If you have any questions, don’t hesitate to contact us.

What Is ERISA?

Before describing fiduciary duties under ERISA, you must understand what ERISA is. ERISA is the acronym for the Employee Retirement Income Security Act—a federal law that sets legal standards for retirement and benefits plans run by private employers. 

ERISA sets minimum standards for these employer-sponsored plans, such as:

  • Standards for how long an employee must work somewhere to participate in a plan; 
  • What is required for an employee to be vested in the plan; 
  • How an employee accrues benefits; and
  • How the plans are funded.

The U.S. Department of Labor enforces ERISA through its Employee Benefits Security Administration Unit. Plus, ERISA provides employees a right to sue for breach of fiduciary duty if their employer or plan fiduciary mismanages the retirement or health plan. 

What Is the Purpose of ERISA?

You may be wondering, What is the purpose of ERISA? ERISA seeks to protect workers and plan beneficiaries from fiduciaries who misuse the plan assets. When workers invest in employer-sponsored retirement plans, for example, they trust that their employer will properly administer these plans in their best interest and in the best interest of their named beneficiaries. ERISA imposes high standards employer-fiduciaries must meet when maintaining and administering these plans.  

What Qualifies as an ERISA Plan?

You may wonder, What qualifies as an ERISA plan. ERISA covers a variety of private employer-run retirement and health plans. 

Private employer retirement plans covered by ERISA include:

  • 401(k) plans, 
  • ROTH 401(k) plans, 
  • Employee stock ownership plans, and 
  • 403(b) plans. 

ERISA-covered benefits plans include group health plans, health maintenance organization (HMO) plans, life insurance, and flexible spending accounts.

What Is an ERISA Fiduciary?

Under ERISA, an employer must designate at least one person who is in charge of the plan’s operations in the written plan. This person is the primary ERISA fiduciary. 

An ERISA fiduciary has discretionary authority over a plan or its assets. Discretionary authority includes the ability to choose the plan or monitor its investments. Anyone with discretionary authority can be considered a fiduciary even if they’re not specifically listed as the plan’s fiduciary. 

There may be multiple ERISA fiduciaries in addition to the person who is specifically named in your plan. Common fiduciaries under ERISA include plan administrators in your human resources department, plan trustees, and investment managers. Certain financial professionals who give investment advice about the plan or its assets are also considered fiduciaries. Employers sometimes outsource these fiduciary roles to others. 

ERISA Fiduciary Duties

Perhaps you understand that an ERISA fiduciary must comply with the law and has to meet various standards when dealing with your retirement or health plan. You understand that plan participants and beneficiaries must have a high level of trust in their ERISA fiduciaries. However, you may wonder, What are fiduciary responsibilities under ERISA? 

An ERISA fiduciary’s duties or responsibilities include:

  • Acting only in the interests of the plan’s participants and beneficiaries;
  • Carrying out their duties with the care, diligence, loyalty, and skill of a reasonably prudent person under the same circumstances;
  • Diversifying the plan’s investments for the benefit of the participants and beneficiaries;
  • Defraying costs of administering the plan;
  • Refraining from any activity that would create a conflict of interest with the participants or beneficiaries, such as self-dealing; and
  • Following the plan’s documents unless they are at odds with ERISA.

The duty to exercise prudence is of paramount importance for ERISA fiduciaries. The duty of prudence requires fiduciaries to monitor the plan’s investments and remove bad investments to minimize the risk of losses. If the fiduciary does not have the knowledge or skill required to fulfill these responsibilities, they must hire someone who does have the required knowledge or skill to help them fulfill their duties.

Contact Our Experienced Attorneys With Questions About ERISA Fiduciary Duties

Whether you are the beneficiary of your loved one’s retirement account or want to create an estate plan to protect the best interests of your family members when you’re gone, you may have questions about your retirement plan and what are fiduciary responsibilities under ERISA. The experienced Texas estate planning attorneys at Robbins Estate Law, are available to explain your rights and protections under ERISA. Contact us today to learn more about how we can help you plan for the future.

Author Photo

Kyle Robbins

Kyle Robbins is the founder and sole owner of The Law
Offices of Kyle Robbins. He received his J.D. with honors from the University of Texas School of Law and his B.S. in Food Chemistry and Microbiology from Oklahoma State University.

Rate this Post

1 Star2 Stars3 Stars4 Stars5 Stars