Introduction to Qualified Plans

NEW YORK, NY, UNITED STATES, July 7, 2022 /EINPresswire.com/ -- Offering a retirement plan can be both rewarding and challenging for an employer. The employees participating in the plan, their beneficiaries, and the employer all benefit from a retirement plan. By deciding to offer the plan, the employer also takes on certain responsibilities and requirements in administering the plan and managing its assets.

Fiduciaries are those individuals and/or entities who manage an employee benefit plan and its assets. Employers often hire outside professionals, sometimes called third-party service providers, or use an internal administrative committee or human resources department to manage some or all of a plan's day-to-day operations. Employers who have hired outside professionals or who use internal committees/resources still have fiduciary responsibilities.

Who is a fiduciary?

The Employee Retirement Income Security Act (ERISA) is the Federal law that sets standards of conduct for fiduciaries. Where this becomes complicated is in the type of Advisor that is hired to the plan to manage the investments and fee collection method. There are generally three types of advisors that can technically operate the Qualified Plan; the commissioned broker (carries no liability towards the plan). The 3(21) Fiduciary Advisor (carries some liability) and the 3(38) Fiduciary Advisors (carries most or all of the liability). According to James Lukezic, Managing Director of Qualified Plans at Old Slip Capital Partners, a leader in ERISA Governance, the issue of “type” of broker is of utmost importance. He states, “Many times Plan Sponsors hire uncredentialed commissioned brokers and feel they have done their duty, until they find out that their broker carries no liability and the plan governance falls squarely back on them should anything truly go wrong”.

In the end, many of the actions involved in operating a plan make the person or entity performing them a fiduciary, unless a true ERISA Fiduciary Advisor is at the helm. Using discretion in administering and managing a plan or controlling the plan’s assets makes that person a fiduciary to the extent of that discretion or control. Providing investment advice for a fee chiefly makes someone a fiduciary. Thus, fiduciary status is based on the functions performed for the plan, not just a person’s title.

Sloane Grayson
Falconer Holdings, LP
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