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Fiduciary Responsibility For Plan Sponsors

What plan sponsors need to know

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Key Takeaways:

  • Fiduciaries have legal and ethical duties

  • The best interest of participants is the true north for fiduciary decisions

  • Fiduciaries can be held personally liable for breaches

A Prudent Selection Process

Selecting the right qualified default investment alternative (QDIA) is an important step in helping to protect plan fiduciaries. Our online analytical tool helps you align your decisions with the needs of each plan’s participant population, an important element of the Department of Labor’s guidelines. 

Fiduciary Checklist for Clients
Half the battle of covering all the fiduciary bases is staying organized. Download the Checklist and share with clients.

Fiduciary Duties

Fiduciary responsibility carries both legal and ethical duties. For qualified retirement plans, they are bound to act exclusively in the best interests of participants—the true north in all decision-making. The risk of not fulfilling these duties comes at a high price. Fiduciaries must: 

  • Act solely in the interest of plan participants and their beneficiaries, with the exclusive purpose of providing them benefits

  • Carry out their duties prudently

  • Follow the plan documents (unless inconsistent with ERISA)

  • Diversify plan investments

  • Pay only reasonable plan expenses. Paying “only reasonable plan expenses” does not equate to paying “the lowest-cost” in services and investment management.

Is Cheapest the Best?

Fees are often debated when choosing plan investments. Fiduciaries should evaluate the appropriateness of fees, share classes and product vehicles (i.e. mutual funds, collective investment trusts or separate accounts) against the services received or judgment criteria. 

More About Liability Risk—It’s Personal

Fiduciaries can be held personally liable to make good on any losses…resulting from their breach in fiduciary duties, and the penalties can be high:

  • Willful violations carry personal criminal penalties of up to $100,000 for individual fiduciaries and ($500,000 for corporations) and up to 10 years in prison

  • Fiduciaries may be liable for losses resulting from participants’ imprudent investment options if the requirements of ERISA Section 404(c) are not satisfied

  • Fiduciaries may be liable for a breach committed by another fiduciary

    • If they knowingly participate in, or attempt to conceal, an act or omission by another fiduciary and know that it’s a breach

    • By failure to fulfill their responsibilities, enables another fiduciary to commit a breach

    • Has knowledge of a breach by another fiduciary (unless he or she makes reasonable efforts to remedy the breach) 

Can Fiduciary Oversight Help You Defeat Litigation?
Read American Century's Case Study about plan litigation and the key factors that contributed to winning the case.

We offer additional support for your retirement practice. From understanding the QDIA selection process to finding the right solution for a plan’s unique profile, we’re here to help.


Speak with one of our DC experts.

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.