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Understanding your role as a fiduciary
Updated over a week ago

Though 401(k) plans are best known for providing valuable tax-advantages for employees saving for retirement, an often-overlooked principle of employer-sponsored retirement plans is the protection afforded to participants by the Employee Retirement Income Security Act of 1974 (“ERISA”) against acts or omissions of those operating the plan.

Recognizing the importance of providing workers with access to fair and secure retirement savings, Congress and regulatory agencies have imposed strict standards of conduct, responsibility, and obligations for fiduciaries of employee benefit plans and provided for remedies and sanctions in the event of any breach of fiduciary responsibilities.

Among the many safeguards mandated by ERISA, is the requirement that any individual exercising control over the retirement plan be held to the highest standards of fiduciary conduct. In effort to meet these standards, employers often rely on professional service providers to assist in meeting their responsibility that their retirement plan is operated in accordance with ERISA. In relying on outside providers, it is important that employers not only understand the roles and responsibilities of service providers who serve as fiduciaries to their plan (and those who don’t), but also the fiduciary roles and responsibilities of the company itself, as well as individuals acting on behalf of the company with regard to the plan.

What does it mean to be a fiduciary?

Employee benefit plans must name at least one fiduciary who will have authority to control and manage plan operation and administration. The core obligation of a fiduciary to an employer-sponsored 401(k) plan is to carry out their duties solely in the interest of plan participants (including beneficiaries). To this end, fiduciaries must:

  • Operate the plan for the exclusive purpose of providing benefits to its participants,

  • Ensure plan expenses are reasonable,

  • Act with due "care, skill, prudence, and diligence,"

  • Diversify the plan's investments to minimize the risk of significant losses, and

  • Follow the terms of the governing plan documents.

Additionally, fiduciaries must avoid engaging in prohibited transactions as defined under section 406 of ERISA. A prohibited transaction refers to a transaction involving the transfer, use or borrowing of plan assets by any “party in interest.” A party in interest is defined very broadly under ERISA, to include everyone from fiduciaries themselves, to non-fiduciary service providers, company owners, directors or officers, family members, plan participants, as well as employees of the company (unless otherwise entitled to receive benefits from the plan).

Prohibited transactions also include conflicts of interest or self-dealing by a fiduciary with regard to the plan. In short, fiduciaries must not permit anyone to benefit from the use of plan assets except the plan participants and beneficiaries.

Fiduciaries to a plan could include a plan sponsor, trustee, plan administrator, investment manager and other individuals who exercise control over the plan.

Understanding your Guideline 401(k) plan fiduciaries

Plan sponsor and named fiduciary

Your company is the plan sponsor as well as the named fiduciary of the plan. ERISA permits a named fiduciary to designate other fiduciaries to oversee various plan functions. In doing so, the named fiduciary may be partially relieved from liability for acts or omissions of designated fiduciaries so long as the named fiduciary itself carries out its own fiduciary obligation to monitor service providers. A plan sponsor can never fully relieve themselves of fiduciary liability.


Your company must appoint an individual to serve as the trustee with oversight of the trust account set up by Guideline for your plan. The trustee is responsible for managing and controlling plan assets, which include carrying out three essential responsibilities:

  1. Invest, control, and manage plan assets,

  2. Pay benefits to participants and/or beneficiaries, and

  3. Maintain trust account records and furnish an annual report.

The role of the trustee is typically filled by someone with sufficient seniority and tenure, such as a CEO, CFO, founder or partner. If an appointed trustee is no longer affiliated with the plan sponsor (the company), then a successor should be timely appointed by the company.

Investment manager

By appointing an investment manager, the employer may rely on the investment expertise of the manager in maintaining the plan investments. As such, it partially relieves the trustee of liability for the acts or omissions of the investment manager with regard to the plan. To be regarded as a 3(38) fiduciary, the investment manager must have authority to manage and control plan assets and must acknowledge its fiduciary status in writing.

Guideline Inc., is a registered investment adviser appointed as the 3(38) investment manager fiduciary for your plan.

In accordance with its investment manager responsibilities, Guideline oversees plan investments in compliance with the plan’s Investment Policy Statement. In addition, as the plan is intended to be ERISA 404(c) compliant, the liability of plan fiduciaries over the investment decisions of participant’s is limited.

Third-party plan administrator

Plan sponsors may also choose to delegate responsibility for plan administration to a third party administrator. Guideline may take on this role for your plan as the plan administrator within the meaning of Section 3(16) of ERISA.

When carrying out its duties as the plan administrator, Guideline shall administer the plan in accordance with the written 401(k) plan document and approve and administer all benefit payments to participants and beneficiaries, including the timely processing of distributions, loans, and hardship withdrawals, as well as provide required participant benefit statements and plan information to participants.


Finally, in Guideline’s capacity as a recordkeeper, Guideline maintains the day-to-day recordkeeping for the 401(k) plan and is responsible for ensuring that records of trust activity are maintained and reconciled against the custodian’s records. Guideline will also furnish trust statements produced by your plan’s custodian Benefits Trust Company (BTC).

Additional detail about Guideline’s Recordkeeping Policies and Procedures may be found here.

Breach of fiduciary duties

So why is it important for you to understand fiduciary roles and responsibilities? Because Congress and regulatory agencies have provided for numerous remedies, sanctions, and the ability to file a federal lawsuit to provide relief to participants who have been harmed as a result of a fiduciary breach, or where a fiduciary has otherwise misappropriated plan assets.

Fiduciaries can be personally liable for restoring assets to the plan in the event of losses or misuse of plan assets along with other financial penalties. Fiduciaries may also be held personally liable for the acts of co-fiduciaries if the fiduciary knowingly aided, abetted, enabled, or otherwise failed to intervene or make a reasonable effort to remedy the breach.


This exposure to personal liability is why ERISA also requires each plan fiduciary who handles plan assets to be covered by a fidelity bond covering at least 10% of total plan assets.

Any individual or entity, regardless of whether they are a fiduciary or not, should not be permitted to handle or otherwise control plan assets unless they are adequately bonded.

As a plan fiduciary, Guideline maintains an ERISA bond covering your plan, which provides protection in the event of a claim of lost plan assets due to fraudulent or dishonest acts by Guideline. Guideline’s bond does not cover acts by any non-Guideline employee. Since ERISA generally requires that every fiduciary of an employee benefit plan and every person who handles funds or other property of such a plan shall be bonded, you must consult your legal counsel to determine what the ERISA bonding requirements are for your organization.. In addition to the ERISA required fidelity bond, some companies choose to obtain additional bonding for plan fiduciaries employed by the company for added protection.

Monitoring of service providers

While Guideline serves as a fiduciary to your 401(k) plan and carries out key functions, as a plan sponsor, your company retains an important duty to monitor Guideline as a service provider. Guideline enables your company to carry out its oversight by providing visibility into plan-related activity in your easy-to-use sponsor dashboard, which includes up-to-date information about participant enrollment and investments, participant and employer contribution activity, service fee invoices, and distributions.

In carrying out your fiduciary responsibility, you must also confirm Guideline has the ability to obtain timely, accurate, and complete information about your company and employees as well as ensure bank account information is kept up to date and adequately funded to enable Guideline to facilitate the timely transfer of all plan participant contributions (and loan repayments, if any) to the trust.

Guideline embraces the highest standards

Maintaining the highest standards of accountability, transparency, and responsibility is fundamental to Guideline’s mission. We have developed a platform to achieve these standards. In contrast to many other providers, Guideline is a full-stack 401(k) provider responsible for carrying out most of the critical functions of your plan. Learn more about our services here.

While Guideline strives to simplify the process for setting up and operating 401(k) plans for employers and minimize the administrative burden of managing 401(k) benefits, as a co-fiduciary, employers should confirm that they understand the roles and responsibilities of all fiduciaries to their Guideline 401(k) plan, so you can do your part to ensure plan assets are adequately safeguarded.

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