An investment fiduciary is any person who is legally responsible for managing someone else’s money. Many of the actions involved in operating a plan make the person performing them a fiduciary. In fact, hiring a service provider makes YOU a fiduciary. Plan administrators assume significant legal responsibility when acting as fiduciary for a 401(k) plan. Most plan administrators have no idea they have accepted this liability.
This link to the US Department of Labor website explains the importance of hiring a professional fiduciary to manage your 401(k) plan: http://www.dol.gov/ebsa/publications/fiduciaryresponsibility.html
To meet their responsibilities as plan sponsors, employers need to understand some basic rules, specifically the Employee Retirement Income Security Act (ERISA). ERISA sets standards of conduct for fiduciaries who manage an employee benefit plan and its assets.
Fiduciaries have important responsibilities and are subject to standards of conduct because they act on behalf of participants in a retirement plan and their beneficiaries. These responsibilities include:
The duty to act prudently is one of a fiduciary’s central responsibilities under ERISA. It requires expertise in a variety of areas, such as investments. Lacking that expertise, a fiduciary will want to hire someone with that professional knowledge to carry out the investment functions.