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An Easy Informal Self-test of Fiduciary Status

Personal candid informal handy hint (not legal or official advice)

from SPBA Active Past President Fred Hunt - May 2016

A huge percent of questions & situations that arise for plans & TPAs (even if seemingly different laws & issues) have an underlying question of how they would be viewed under ERISA fiduciary.  So, ERISA fiduciary it is the most efficient place to start when figuring out an answer to any question of "May the plan (or employer or TPA) do........?

Anyone or any entity with any discretionary authority takes on some fiduciary responsibility to the extent of that authority being exercised.  Consequently, only a person or entity who declares to the client, “we never use our brain for anything related to the plan or participant” (and truly does nothing without specific direction/approval can claim to escape fiduciary status.)  And….DOL enforcement at the time of investigation will decide if and how much fiduciary responsibility they feel each entity has.  So, if there is any chance of DOL considering you to have any discretionary authority, you don’t have the option just saying ahead of time or during the investigation “I’m not a fiduciary.”

My personal easy informal self-test of whether a situation might be a fiduciary problem:  Take whatever idea or situation you may be facing.  Imagine if a TV investigative reporter team bursts into your office and looks at absolutely everything, and applies the worst possible interpretation to everything.  (That’s what a DOL investigation can do.)  

Here’s the test, so you must be totally honest with yourself:  If there is anything at all in what the TV reporter (or DOL investigator) might turn up that would make you squirm if shown on TV, that is a wonderful red flag for you that there is probably an ERISA fiduciary concern you should address.  This is in no way official nor is it legal opinion or advice; just a handy informal tool to jog thinking and avoid problems.