Trust Examination Manual
29 CFR 2509.75-8 - Questions and answers relating
to fiduciary responsibility under the Employee Retirement Income Security
Act of 1974.
Section Number: 2509.75-8
Section Name: Questions and answers relating to fiduciary
responsibility under the Employee Retirement Income Security Act of
1974.
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The Department of Labor today issued questions and answers
relating to certain aspects of fiduciary responsibility
under the Act, thereby supplementing ERISA IB 75-5 (29
CFR 2555.75-5) which was issued on June 24, 1975, and
published in the Federal Register on July 28, 1975 (40 FR
31598). Pending the issuance of regulations or other
guidelines, persons may rely on the answers to these
questions in order to resolve the issues that are specifically
considered. No inferences should be drawn regarding issues
not raised which may be suggested by a particular question
and answer or as to why certain questions, and not others,
are included. Furthermore, in applying the questions
and answers, the effect of subsequent legislation, regulations,
court decisions, and interpretive bulletins must be considered.
To the extent that plans utilize or rely on these answers
and the requirements of regulations subsequently adopted vary from the
answers relied on, such plans may
have to be amended. An index of the questions and answers, relating them to
the
appropriate sections of the Act, is also provided.
Index
Key to question prefixes: D--refers to definitions; FR--refers
to
fiduciary responsibility.
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Section No. Question No.
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3(21)(A).................................. D-2, D-3, D-4, D-5.
3(38)..................................... FR-15.
402(c)(1)................................. FR-12.
402(c)(2)................................. FR-15.
402(c)(3)................................. FR-15.
403(a)(2)................................. FR-15.
404(a)(1)(B).............................. FR-11, FR-17.
405(a).................................... FR-13, FR-14, FR-16.
405(c)(1)................................. FR-12, FR-15.
405(c)(2)................................. D-4, FR-13, FR-14, FR-16.
412....................................... D-2.
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Note: Questions D-2, D-3, D-4, and D-5 relate to not only section 3(21)(A)
of title I of the Act, but also section 4975(e)(3) of the Internal Revenue
Code (section 2003 of the Act). The Internal Revenue
Service has indicated its concurrence with the answers to these questions.
D-2 Q: Are persons who have no power to make any decisions
as to plan policy, interpretations, practices or procedures,
but who perform the following administrative functions
for an employee benefit plan, within a framework of policies,
interpretations, rules, practices and procedures made
by other persons, fiduciaries with respect to the plan:
(1) Application of rules determining eligibility for participation
or benefits;
(2) Calculation of services and compensation credits for benefits;
(3) Preparation of employee communications material;
(4) Maintenance of participants' service and employment records;
(5) Preparation of reports required by government agencies;
(6) Calculation of benefits;
(7) Orientation of new participants and advising participants of
their rights and options under the plan;
(8) Collection of contributions and application of contributions as
provided in the plan;
(9) Preparation of reports concerning participants' benefits;
(10) Processing of claims; and
(11) Making recommendations to others for decisions with respect to
plan administration?
A:
No. Only persons who perform one or more of the functions
described in section 3(21)(A) of the Act with respect
to an employee benefit plan are fiduciaries. Therefore,
a person who performs purely ministerial functions such
as the types described above for an employee benefit
plan within a framework of policies, interpretations,
rules, practices and procedures made by other persons
is not a fiduciary because such person does not have
discretionary authority or discretionary control respecting
management of the plan, does not exercise any authority
or control respecting management or disposition of the
assets of the plan, and does not render investment advice
with respect to any money or other property of the plan
and has no authority or responsibility to do so. However, although such a person may not be a plan
fiduciary, he may be subject to the bonding requirements
contained in section 412 of the Act if he handles funds
or other property of the plan within the meaning of
applicable regulations. The Internal Revenue Service
notes that such persons would not be
considered plan fiduciaries within the meaning of section
4975(e)(3) of the Internal Revenue Code of 1954.
D-3 Q:
Does a person automatically become a fiduciary with
respect to a plan by reason of holding certain positions
in the administration of such plan?
A:
Some offices or positions of an employee benefit
plan by their very nature require persons who
hold them to perform one or more of the functions
described in section 3(21)(A) of the Act. For example,
a plan administrator or a trustee of a plan must,
be the very nature of his position, have ``discretionary
authority or discretionary responsibility in the
administration'' of the plan within the meaning of
section 3(21)(A)(iii) of the Act. Persons who hold
such positions will therefore
be fiduciaries. Other offices and positions should be
examined to determine whether they involve the performance
of any of the functions described in section 3(21)(A)
of the Act. For example, a plan might designate as a
``benefit supervisor'' a plan employee whose sole function
is to calculate the amount of benefits to which each
plan participant is entitled in accordance with
a mathematical formula contained in the written instrument
pursuant to which the plan is maintained. The benefit
supervisor, after calculating the benefits, would then
inform the plan administrator of the results of his calculations,
and the plan administrator would authorize the
payment of benefits to a particular plan
participant. The benefit supervisor does not perform
any of the functions described in section 3(21)(A) of
the Act and is not, therefore, a plan fiduciary. However,
the plan might designate as a ``benefit supervisor''
a plan employee who has the final authority to authorize
or disallow benefit payments in cases where a dispute
exists as to the interpretation of plan provisions relating
to eligibility for benefits. Under these circumstances,
the benefit supervisor would be a fiduciary within the
meaning of section 3(21)(A) of the Act. The Internal
Revenue Service notes that it would reach the same answer
to this question under section 4975(e)(3) of the Internal
Revenue Code of 1954.
D-4 Q:
In the case of a plan established and maintained
by an employer, are members of the board of
directors of the employer fiduciaries with respect to
the plan?
A:
Members of the board of directors of an employer
which maintains an employee benefit plan
will be fiduciaries only to the extent that they have
responsibility for the functions described in section
3(21)(A) of the Act. For example, the board of directors
may be responsible for the selection and
retention of plan fiduciaries. In such a case, members
of the board of directors exercise ``discretionary authority
or discretionary control respecting management
of such plan'' and are,
therefore, fiduciaries with respect to the
plan. However, their responsibility, and,
consequently, their liability, is limited to the selection
and retention of fiduciaries (apart from co-fiduciary
liability arising under circumstances described in section
405(a) of the Act). In addition, if the directors are
made named fiduciaries of the plan, their liability may
be limited pursuant to a procedure provided
for in the plan instrument for the allocation
of fiduciary responsibilities among named
fiduciaries or for the designation of persons other than
named fiduciaries to carry out fiduciary
responsibilities, as provided in section
405(c)(2).The Internal Revenue Service notes
that it would reach the same answer to this question
under section 4975(e)(3) of the Internal Revenue
Code of 1954.
D-5 Q:
Is an officer or employee of an employer
or employee organization which sponsors
an employee benefit plan a fiduciary with respect to
the plan solely by reason of holding such office or
employment if he or she performs none of
the functions described in section 3(21)(A)
of the Act?
A:
No, for the reasons stated in response
to question D-2. The Internal Revenue
Service notes that it would reach the same answer to
this question under section 4975(e)(3) of the Internal
Revenue
Code of 1954.
FR-11 Q:
In discharging fiduciary responsibilities,
may a fiduciary with respect to a plan
rely on information, data, statistics or analyses provided
by other persons who perform purely ministerial functions
for such plan, such as those persons described
in D-2 above?
A:
A plan fiduciary may rely on information,
data, statistics or analyses furnished
by persons performing ministerial functions for
the plan, provided that he has exercised
prudence in the selection and retention
of such persons. The plan fiduciary will be deemed
to have acted prudently in such selection
and retention if, in the exercise
of ordinary care in such situation,
he has no reason to doubt the competence,
integrity or responsibility of such persons.
FR-12 Q:
How many fiduciaries must an employee
benefit plan have?
A:
There is no required number of
fiduciaries that a plan must
have. Each plan must, of course, have
at least one named fiduciary
who serves as plan administrator
and, if plan assets are held in trust,
the plan
must have at least one trustee.
If these requirements are met,
there
is no limit on the number of
fiduciaries a plan may have. A plan may have as few or
as many fiduciaries as are necessary for its operation
and administration. Under section
402(c)(1) of the Act, if the
plan so provides, any person
or group of persons may serve in more
than
one fiduciary capacity, including
serving both as trustee and administrator.
Conversely, fiduciary responsibilities not involving
management and control
of plan assets may, under section 405(c)(1) of the Act,
be allocated among named fiduciaries
and named fiduciaries may designate
persons other than named fiduciaries to carry out such
fiduciary responsibilities, if the plan
instrument expressly provides
procedures for such allocation
or designation.
FR-13 Q:
If the named fiduciaries of
an employee benefit plan allocate their fiduciary responsibilities
among themselves in accordance
with a procedure set forth in the plan for the allocation
of responsibilities for operation
and administration of the plan,
to what extent will a named
fiduciary be relieved of liability for
acts
and omissions of other named
fiduciaries in carrying out fiduciary
responsibilities allocated
to them?
A:
If named fiduciaries of a
plan allocate responsibilities in accordance with a
procedure for such allocation set forth
in
the plan,
a named fiduciary will not
be liable for acts and omissions
of other
named fiduciaries in carrying
out fiduciary responsibilities
which have been allocated
to them, except as provided in section 405(a)
of the Act, relating to the
general rules of co-fiduciary responsibility,
and section 405(c)(2)(A) of the
Act, relating in relevant
part to
standards for establishment
and implementation of allocation
procedures. However, if the
instrument under which the
plan is maintained
does not provide for a procedure
for the allocation of fiduciary
responsibilities among named
fiduciaries, any allocation
which the named fiduciaries
may make among themselves
will be ineffective
to relieve
a named fiduciary from responsibility
or liability for the performance
of fiduciary responsibilities
allocated to other named
fiduciaries.
FR-14 Q:
If the named fiduciaries
of an employee benefit
plan designate a person who
is not a named fiduciary
to
carry
out fiduciary responsibilities,
to what extent will the named fiduciaries
be relieved of liability
for the acts and omissions of such person
in
the
performance of his duties?
A:
If the instrument under
which the plan is maintained
provides
for a procedure under
which a named fiduciary may
designate persons
who are not named fiduciaries
to carry out fiduciary
responsibilities,
named fiduciaries of
the plan will not be liable for
acts and
omissions of a person
who is not a named fiduciary in carrying
out the fiduciary responsibilities which
such person has been
designated to carry
out, except as provided
in section 405(a) of
the
Act, relating
to the general rules
of co-fiduciary liability,
and section
405(c)(2)(A)
of the Act, relating
in relevant part to the
designation
of persons
to carry
out fiduciary responsibilities. However, if the instrument
under which the plan
is maintained does
not provide for a procedure
for the designation of
persons who
are not named fiduciaries
to carry out fiduciary responsibilities,
then
any such designation
which the named fiduciaries may
make will
not relieve the named
fiduciaries from responsibility or liability
for the acts
and omissions of the
persons so designated.
FR-15 Q:
May a named fiduciary
delegate responsibility
for management and
control of plan assets to anyone
other
than
a person who is an
investment manager as defined in section
3(38) of
the Act so
as to be relieved of
liability for the acts and omissions
of the
person
to whom such responsibility
is delegated?
A:
No. Section 405(c)(1)
does not allow named
fiduciaries
to delegate to others
authority ordiscretion
to manage
or control plan assets.
However, under the terms of
sections
403(a)(2) and 402(c)(3)
of
the Act, such authority and discretion
may be delegated
to persons who
are investment managers
as defined in section 3(38)
of the
Act. Further,
under section 402(c)(2)
of the Act, if the plan
so provides,
a
named fiduciary
may employ other
persons to render advice
to the named
fiduciary
to assist the
named fiduciary in
carrying out his
investment
responsibilities
under the plan.
FR-16 Q:
Is a fiduciary
who is not a named fiduciary
with
respect to
an employee benefit
plan personally
liable for
all phases of the
management and
administration
of the plan?
A:
A fiduciary with
respect to the
plan who is
not a named
fiduciary is
a fiduciary only to the extent
that
he or
she performs
one or
more of the functions
described in
section 3(21)(A)
of the Act.
The personal liability of
a fiduciary who
is
not a named
fiduciary is
generally limited
to the fiduciary
functions,
which
he or she performs
with respect
to the plan.
With respect
to the
extent of
liability
of a named fiduciary of
a plan where
duties
are
properly allocated
among
named fiduciaries
or where named
fiduciaries
properly designate
other persons
to carry out
certain fiduciary
duties,
see question
FR-13 and FR-14. In addition,
any fiduciary
may become
liable for
breaches of fiduciary
responsibility
committed by
another fiduciary
of the
same plan under
circumstances
giving rise to
co fiduciary
liability, as
provided in section 405(a)
of the Act.
FR-17 Q:
What are the
ongoing responsibilities
of a fiduciary
who has appointed
trustees or
other fiduciaries
with respect
to
these appointments?
A:
At reasonable
intervals
the performance
of trustees
and other
fiduciaries should be
reviewed
by
the appointing
fiduciary
in such manner
as may be reasonably
expected
to ensure
that their
performance has been
in compliance
with the
terms
of the plan
and
statutory
standards,
and satisfies
the
needs ofthe
plan. No
single
procedure
will be appropriate
in all cases;
the procedure
adopted may
vary in accordance
with the
nature of
the plan
and other
facts and
circumstances
relevant
to the choice
of the
procedure.
[40 FR 47491,
Oct. 9,
1975. Redesignated
at
41 FR 1906,
Jan. 13,
1976]
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