(b)lines Ask the Experts – Do We Have to Hire an Outside Adviser?

“I work at a Employee Retirement Income Security Act (ERISA) 403(b) plan sponsor. We currently do NOT engage an investment adviser for the plan. Instead, we review the investments on our own.

“Does ERISA require us to engage an outside adviser? Or is it a recommendation as a best practice?” 

Michael A. Webb, vice president, Cammack Retirement Group, answers:

Excellent question! ERISA does not mandate the use of the investment adviser, and indeed, there is not a tremendous amount of guidance about the subject.

However, the Department of Labor (DOL) does state the following in its publication Meeting Your Fiduciary Responsibilities:

“The duty to act prudently is one of a fiduciary’s central responsibilities under ERISA. It requires expertise in a variety of areas, such as investments. Lacking that expertise, a fiduciary will want to hire someone with that professional knowledge to carry out the investment and other functions. Prudence focuses on the process for making fiduciary decisions. Therefore, it is wise to document decisions and the basis for those decisions. For instance, in hiring any plan service provider, a fiduciary may want to survey a number of potential providers, asking for the same information and providing the same requirements. By doing so, a fiduciary can document the process and make a meaningful comparison and selection.”

Thus, according to this guidance, an adviser selected in a diligent and well-documented process can be of benefit to the many plans that lack in-house expertise on retirement plan investing and/or other fiduciary practice areas.

Thank you for your question!


NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.