Managing Your Fiduciary Obligations

Benefits of Outsourcing and Questions Every Plan Sponsor Should Consider
Joe Frustaglio

By Joe Frustaglio, vice president, private sector retirement plans, Nationwide Financial

Every qualified retirement plan is subject to the fiduciary responsibilities detailed by the Employee Retirement Income Security Act (ERISA). Ultimately, it is up to the employer, in its role as plan sponsor, to determine what level of fiduciary and legal liability it wants to assume in the operation of a retirement plan. The good news is that outside fiduciary service providers are available to help. This article takes a look at the various types of plan fiduciaries and the benefits of having a third party handle this important responsibility.

The Named Fiduciary

ERISA Section 402(a) requires that every employee benefit plan be established and maintained based on a written plan document, which names one or more fiduciaries.

Think of the named fiduciary as the coach of the plan. It is the person or entity responsible for the appointment and monitoring of the trustee and the plan administrator, and who has ultimate responsibility for the operation of the plan. In most plans, the employer or one or more employees will act as the named fiduciary, however, the role of the named fiduciary can be outsourced to a professional.

When considering whether to engage an outside party to fill this role, ask yourself:


  • Am I comfortable with the responsibility of appointing and managing my plan’s trustees and the plan administrator?


The Plan Administrator Fiduciary—ERISA Section 3(16)

The 3(16) plan administrator oversees the daily operations of the plan. This includes making benefit determinations for participants and beneficiaries, administering plan provisions for loan approval and processing, making appropriate disclosures to participants and ensuring regulatory filings are completed on time.

There can be benefits to outsourcing the role of the 3(16) plan administrator. Ask yourself the following questions before agreeing to serve in that capacity:


  • Am I comfortable managing my plan’s operation, and am I prepared to devote adequate time to this task?
  • Am I comfortable with the daily administration activities involved in maintaining a smooth-running plan?