Corporate Trusteeship: A Fiduciary Analysis

By Tallerman, Sheree R. | The CPA Journal, May 2001 | Go to article overview
Save to active project

Corporate Trusteeship: A Fiduciary Analysis


Tallerman, Sheree R., The CPA Journal


ERISA PROVIDES EXPLICIT EXCULPATORY RELIEF if plan trustees or the plan sponsor delegates investment decisions to a professional investment manager.

CORPORATE TRUSTEESHIP: A FIDUCIARY ANALYSIS

By Sheree A Tale Geller & Wind, Ltd.

The Employee Retirement Income Security Act ("ERISA") requires that plan assets, including 401(k) employee salary deferrals and employer contribulions, be used only to pay benefits to participants and their beneficiaries and to defray reasonable plan operating expenses. Accordingly, qualified plans under ERISA must establish trusts to hold all plan assets. The plan sponsor either manages the plan assets or delegates this responsibility to trustees named in the trust instrument or appointed by the plan sponsor.

ERISA Fiduciaries

A named fiduciary is identified either in the plan instrument or in accord with a plan provision whereby the plan sponsor identifies the fiduciary. Either an individual or an entity may be a named fiduciary or may become a fiduciary based on the actual functions they perform. A named fiduciary commonly achieves fiduciary status by bearing the title, or performing the functions, of a trustee.

Functions giving rise to fiduciary status include exercising any discretionary authority or control over plan management or exercising any authority or control over the investment management or disposition of plan assets. Furthermore, an individual or entity may become a fiduciary by rendering investment advice for a fee.

Administrative managers of the plan sponsor are usually fiduciaries because of their involvement in the daily operation of the plan. Inevitably, they exercise substantial authority and control over final decisions on benefit claims, plan design, plan asset investment, and the selection and retention of plan service providers.

Although ERISA empowers trustees with complete control over plan assets held in trust, trust investment decisions may be delegated to the plan's investment committee, the officers of the plan sponsor, or other designated investment managers. The plan trustee is not liable as a fiduciary for the investment decisions reached by others empowered to make them; rather, those individuals or entities that actually function as investment managers are. Nevertheless, if the agreement with the plan sponsor indicates that the plan trustee selects and manages investments, then the plan trustee will be held to the same liability standards as any other investment manager.

ERISA provides explicit exculpatory relief if plan trustees or the plan sponsor delegates the responsibility for investment decisions to a professional investment manager. No trustee will be held liable for acts or omissions of duly appointed professional investment managers. Nor are plan trustees responsible for the investment and management of plan assets under the control of professional investment managers. Trustees subject to the direction of the named fiduciary are called "directed trustees." Directed trustees will not be held liable for following the instructions of the named fiduciaries or their delegates (i.e., investment managers).

Personal Liability

ERISA offers plan fiduciaries, including employer representatives and trustees, significant protection against personal liability for investment decisions if they exercise reasonable care in the selection of an investment manager, provide the manager with a written statement of the fund's investment objectives, and periodically monitor the manager's investment performance.

Plan fiduciaries are personally liable for losses caused by their breaches of any of the fiduciary responsibilities, obligations, or duties imposed by ERISA. Additionally, plan fiduciaries may be liable for breaches of fiduciary responsibility committed by other fiduciaries, including directed trustees.

In most qualified plans, a mutual fund company, insurance company, or stockbroker has actual custody of the plan assets.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Corporate Trusteeship: A Fiduciary Analysis
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.