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Who is an ERISA Fiduciary?

TPS Group
Tel: (203) 234-2229 www.tpsgroup.com Fax: (203) 234-8369
The Pension Service, Inc.
127 Washington Ave., W. Wing, North Haven, CT 06473
The Pension Service LLC TPSI The Pension Service of NNE
468 Great Road 270 Northpointe Pkwy., Suite 10 869 Main St., Suite 400
Acton, MA 01720 Amherst, NY 14228 Westbrook, ME 04092
Tel: (978) 369-2318 Tel: (716) 839-9405 Tel: (207) 854-1304
Fax: (978) 369-2319 Fax: (716) 839-9713 Fax: (207) 854-1305
 Table of Contents

I. How does ERISA define a fiduciary?

II. What are the general duties of a Fiduciary and other “Standards of
Conduct”

III. Definitions of Fiduciaries:

• Section 9.10. of Corbel Plan Document

IV. Named Fiduciaries: Responsibilities and Actions

V. Summary

VI. Disclaimer

VII. Attachments

TPS Group
Tel: (203) 234-2229 www.tpsgroup.com Fax: (203) 234-8369
The Pension Service, Inc.
127 Washington Ave., W. Wing, North Haven, CT 06473
The Pension Service LLC TPSI The Pension Service of NNE
468 Great Road 270 Northpointe Pkwy., Suite 10 869 Main St., Suite 400
Acton, MA 01720 Amherst, NY 14228 Westbrook, ME 04092
Tel: (978) 369-2318 Tel: (716) 839-9405 Tel: (207) 854-1304
Fax: (978) 369-2319 Fax: (716) 839-9713 Fax: (207) 854-1305
 I. How does ERISA define a Fiduciary?

How does ERISA define who is a fiduciary?

I. 3(21) Fiduciary: (Named Fiduciary)

ERISA Section 3(21) (A) provides that a person is a fiduciary with respect to an
employee benefit plan to the extent that such a person does any of the following:

1. Exercises any discretionary authority or control over the management of

a plan, or over the management or disposition of plan assets [ERISA §
3(21) (A) (i)];

2. Renders investment advice for a fee or other compensation, direct or

indirect, over the disposition of plan assets, or has any authority or
responsibility to do so [ERISA § 3(21) (A) (ii)]; or

3. Has any discretionary authority or discretionary responsibility in the

administration of such plan [ERISA § 3(21) (A) (iii)].

"The statute defines a 'fiduciary' as a person who exercises authority or discretion over
the administration of a plan, but only when performing those functions listed above”

ERISA Section 402(a) states that every plan must have at least one (1) named fiduciary
who can appoint an investment manager.

II. 3(38) Fiduciary: (Investment Manager)

ERISA section 3(38) defines the “Investment Manager” as a fiduciary with full
discretionary powers for selecting, monitoring and replacing the investment options in
the plan. When appointed by an authorized fiduciary, the 3(38) takes an ascendant
role over the trustee. The trustee then becomes “directed” by the ERISA section 3(38)
Investment Manager. The 3(38) fiduciary is appointed and monitored by the 3(21)
fiduciary.

1) The 3(38) may hire and monitor other service providers relevant to its scope of
responsibility. They will monitor fund managers (and replace them if prudent to do
so), custodians and others. It has the powers and the duty to replace such service
providers as it deems necessary and appropriate in its sole discretion.

2) The 3(38) must also ensure that the objectives of the plan’s portfolios are being
met, with all the attendant responsibilities associated therewith.

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III. 3(16) Fiduciary: (Plan Administrator)

ERISA Section 3(16) defines the Plan Administrator of the plan. The Plan Administrator
should not be confused with a “Pension Administrator” or a “Third Party Administrator”.

The Plan Administrator has the following primary responsibilities:

• Ensures all filings with the federal government (form 5500, etc.) are timely
made;
• Makes important disclosures to plan participants;
• Hires plan service providers if no other fiduciary has that responsibility; and
• Fulfills other responsibilities as set forth in plan document.

ERISA sections 101, 102, and 103 describe the specific fiduciary responsibilities and
duties of the Plan Administrator. The plan sponsor will normally reserve these functions
of the Plan Administrator. But a plan sponsor may appoint an independent fiduciary to
serve as the ERISA section 3(16) Plan Administrator.

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II. What are the general duties of Fiduciary and other “Standards of Conduct”

Under ERISA Section 404, a fiduciary provides the following basic duties and
responsibilities:

1. Duty of Loyalty
• Act solely in the interest of plan participants and their beneficiaries;

• Act for the exclusive purpose of providing benefits to plan participants and their
beneficiaries and defraying reasonable expenses of administering the plan;

• May not take actions to benefit his or her own account to detriment of plan
participants

2. Duty of Prudence
• Exercise the same care, skill, prudence and diligence that a prudent person acting in
a like capacity and familiar with such matters would exercise in the conduct of an
enterprise of a like character and with like aims;

3. Duty of Diversification
• If the fiduciary is involved in investing plan assets, diversify plan investments so as
to minimize the risk of large losses (unless it is clearly prudent not to do so under
the circumstances); and

• Monitor the investments.

4. Duty to follow Plan Document

• Act in accordance with the documents and instruments governing the plan (insofar
as the documents and instruments are consistent with ERISA).

Does ERISA include any other standards of conduct governing fiduciaries?

• Bonding: Every fiduciary who handles funds or other property of the plan has to be
bonded.

• If a fiduciary does not have sufficient knowledge to evaluate, must go to expert

advisor. Must acquire enough information to make a well-informed decision.

• ERISA describes certain transactions that are deemed per se prohibited if a fiduciary
causes the plan to engage in any one of those transactions with a party in interest.
[ERISA § 406] The enumerated transactions include:
• The sale or exchange of property between the plan and a party in interest;
• The sale of employer stock between the company and the plan; and
• Payment of fees to service providers that are parties in interest and others.

• ERISA Section 406 also forbids fiduciary self-dealing.

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 III. Definitions of Fiduciaries

Named Fiduciary 3(21) Fiduciary

One who is authorized in the plan document to control the operation and administration of the
plan. A named fiduciary can be a person or group of people who are actually named in the plan
document or who can be identified by a procedure described in the plan document (see next
page).

Plan Sponsor (Employer)

The entity that establishes an employee benefit plan — usually an employer, an employee
organization, or both.

Plan Administrator 3(16) Fiduciary

The person or entity responsible for administering a pension plan. The plan document may
designate a plan administrator by name or may describe a procedure for appointing that
person(s) or committee. If an administrator is not appointed, the plan sponsor (employer) is the
plan administrator. The plan administrator is not a third-party administrator who performs
administrator functions for the plan and lacks discretionary authority. Instead, the plan
administrator has responsibility and authority for administering the plan.

Trustee
An entity or person who holds title to assets in trust for the benefit of participants. Trustees have
exclusive authority and discretion to manage and control plan assets; however, this authority
and discretion is limited to the extent that the plan states that the trustees are subject to the
direction of participants or of a named fiduciary who is not a trustee, or the authority to manage,
acquire or dispose of plan assets is delegated to one or more investment managers.

Investment Manager 3(38) Fiduciary

Under ERISA, an investment manager is a fiduciary who:

1) Exercises discretionary authority or control in the management of the plan or exercises

any authority or control over the management or disposition of the plan assets;
2) Renders investment advice for a fee or other compensation (direct or indirect) for any
assets of the plan, or has any authority or responsibility to do so; or
3) Has discretionary authority or discretionary responsibility in the administration of the plan.

Who is not a plan fiduciary?

In the day-to-day administration of a retirement plan, some individuals are responsible for
performing administrative functions that do not require discretionary decisions or the provision
of investment advice. Individuals who perform administrative functions for the plan but who
cannot make decisions about plan assets, policies or interpretations are not fiduciaries.

The following are examples of administrative functions that are not considered fiduciary
activities:

• Applying rules to determine eligibility for participation or benefits

• Preparing employee communication materials
• Calculating benefits according to the rules in the plan document
• Receiving contributions and applying them as provided in the plan

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 Section 9.10 of Corbel Plan Document

9.9 ACTION BY THE EMPLOYER

Whenever the Employer under the terms of the Plan is permitted or required to do or perform any act or
matter or thing, it shall be done and performed by a person duly authorized by its legally constituted
authority.

9.10 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY

The named Fiduciaries of this Plan are (1) the Employer, (2) the Administrator, (3) any discretionary Trustee,
and (4) any Investment Manager appointed hereunder. The Employer may, however, modify the preceding
sentence to add or remove named Fiduciaries. The named Fiduciaries shall have only those specific powers,
duties, responsibilities, and obligations as are specifically given them under the Plan including, but not
limited to, any agreement allocating or delegating their responsibilities, the terms of which are incorporated
herein by reference. In general, the Employer shall have the sole responsibility for making the contributions
provided for under the Plan; and shall have the authority to appoint and remove the Trustee and the
Administrator; to formulate the Plan's funding policy and method; and to amend or terminate, in whole or
in part, the Plan. The Administrator shall have the sole responsibility for the administration of the Plan,
including, but not limited to, the items specified in Article II of the Plan, as the same may be allocated or
delegated thereunder. The Administrator shall act as the named Fiduciary responsible for communicating
with the Participant according to the Participant Direction Procedures. If the Trustee has discretionary
authority, it shall have the sole responsibility of management of the assets held under the Trust, except to
the extent directed pursuant to Article II or with respect to those assets, the management of which has been
assigned to an Investment Manager, who shall be solely responsible for the management of the assets
assigned to it, all as specifically provided in the Plan. Each named Fiduciary warrants that any directions
given, information famished, or action taken by it shall be in accordance with the provisions of the Plan,
authorizing or providing for such direction, information or action. Furthermore, each named Fiduciary may
rely upon any such direction, information or action of another named Fiduciary as being proper under the
Plan, and is not required under the Plan to inquire into the propriety of any such direction, information or
action. It is intended under the Plan that each named Fiduciary shall be responsible for the proper exercise
of its own powers, duties, responsibilities and obligations under the Plan as specified or allocated herein.
No named Fiduciary shall guarantee the Trust Fund in any manner against investment loss or depreciation
in asset value. Any person or group may serve in more than one Fiduciary capacity.

9.11 APPROVAL BY INTERNAL REVENUE SERVICE

Notwithstanding anything herein to the contrary, if, pursuant to an application for qualification filed by or
on behalf of the Plan by the time prescribed by law for filing the Employer's return for the taxable year in
which the Plan is adopted, or such later date that the Secretary of the Treasury may prescribe, the
Commissioner of Internal Revenue Service or the Commissioner's delegate should determine that the Plan
does not initially qualify as a tax-exempt plan under Code §§401 and 501, and such determination is not
contested, or if contested, is finally upheld, then if the Plan is a new plan, it shall be void ab initio and all
amounts contributed to the Plan by the Employer, less expenses paid, shall be returned within one (1) year
after the date the initial qualification is denied, and the Plan shall terminate, and the Trustee shall be
discharged from all further obligations. If the disqualification relates to an amended plan, then the Plan shall
operate as if it had not been amended.

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 IV. Named Fiduciaries: Responsibilities and Actions

Plan Sponsor (Employer)

• Acts to appoint other plan fiduciaries (see Section 2.1 of Corbel Plan
Document)(Attachment #1)
• Delegating responsibility to or allocating duties among plan fiduciaries
• Monitor their performance periodically
• “Settlor” category functions i.e., plan establishment, amendment or termination are
not fiduciary in nature
• Remit plan contributions timely

Actions

• Meet with various fiduciaries on periodic basis and document process

• Use due diligence filing checklist and fiduciary meeting checklist

Plan Administrator

• Responsible for administration of the plan (see Section 2.4 of Corbel Plan
Document)(Attachment #1)
• Typically is the employer or an officer of the employer
• Hires TPA “Third Party Administrator” (not a fiduciary) to assist in administration

Actions

• Meets with other fiduciaries and reviews the appropriate section of the two checklists

Trustee

• Responsible for management and control of plan assets, subject to the direction of the
plan participant (see Section 5.1 of Corbel Trust Document and Section 4.12 of Corbel
Plan Document)(Attachment #2)

Actions

• Meets with other fiduciaries and reviews the appropriate section of the two checklists
• Develop an Investment Policy Statement “IPS”

Investment Manager

• Responsible for management of plan assets (see section 9.10 of Corbel Plan Document)

Actions

• 404(c) and participant direction (see section 2.4(l) (Attachment #1)

• Election Form for Self Directed Brokerage Account (See Attachment)

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 Named Fiduciaries: Responsibilities and Actions

Fiduciary Meeting Checklist

This Plan Fiduciary Meeting Checklist provides specific topics that can be built into an agenda
for such a meeting

This checklist can also be a source for action items that need to be addressed

• Read minutes from previous plan fiduciary meeting and provide approval.

• Review plan investments (Investment Policy Statement)

• Conduct a plan review:

o Review recent changes in the law that may affect the plan since the last review
o Review Internal Revenue Service, Department of Labor or other governmental
agency regulations or proposals that may affect the plan
o Consider potential changes in plan design
o Review recent plan amendments

• Review participant education and communication:

o Review the results of any enrollment meetings held since the last review and
discuss changes for future meetings
▪ Schedule the next enrollment meeting
o Review the results of any participant educational meetings held since the last
review and discuss changes for future meetings
▪ Schedule the next participant education meeting

• Review the plan operations

o Review service providers' performance against plan needs and service provider
agreements, including a review of fees and expenses
o Ensure that plan contributions are being segregated and invested into the plan as
soon as possible
o Ensure that the plan continues to qualify for relief under ERISA 404(c), if
applicable

• Review any miscellaneous items or issues

• Finalize changes and/or assignments to document in the meeting minutes for

review and approval in the next meeting.

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 Named Fiduciaries: Responsibilities and Actions

Due Diligence Filing Checklist

Plan fiduciaries must carefully document the processes they have followed in fulfilling their
duties. A complete and detailed due diligence file will help illustrate the prudent steps you have
taken in fulfilling your fiduciary responsibilities.

The following due diligence file checklist will assist you not only in selecting and monitoring
service providers, but will also assist you with the ongoing task of monitoring the plan
investments, operation, and administration.

Plan Records

• Plan and Trust Documents

o Plan and Trust Documents, including amendments
o Summary Plan Description, including updates, and record of participant receipt
o IRS Determination Letter

• Employee Communications & Education

o ERISA 404(c) communications
o Correspondence announcing the plan
o Pre-enrollment and enrollment communications
o Summary Annual Report (SAR)

• Filings
o Form 5500
o Auditors' statements, if applicable

Selection of Investment and Service Providers

• Provider selection criteria and comparisons

o Request for Proposal and/or other documentation of provider search and
requirements
o Documentation of criteria used for selection of provider, including provider
proposal materials, consultant reports, references, etc.
o Cost comparison (e.g., Department of Labor fee worksheet)

• Service Provider Agreements and Insurance

o Investment provider and Third Party Pension Administrator (TPA) agreements and
any updates or amendments
o Proof of insurance supplied by service providers
o Fidelity Bonds to comply with ERISA Section 412, if applicable

• Selection of Investments Options

o Investment Policy Statement
o Documentation used to select investment options (e.g., Investment Profiles,
performance summary, and other information gathered for investment analysis)

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Ongoing Monitoring

• Insurance Policies and Bonds

o Fidelity bonds to comply with ERISA Section 412
o Fiduciary liability and directors & officers policies, if applicable
o Proof of insurance by service providers

• Employee Communications & Education

o Documentation of new participants' receipt of plan communications (e.g, SPD
and other required communications.
o Notification to participants regarding plan changes

• Investment Monitoring
o Documentation of periodic investment review including any updates to the
Investment Policy Statement or investment monitoring criteria
o Updated investment information provided by investment provider, including
fund performance and expense information (Investment Profiles, performance
summaries)
o Other information gathered for analysis of plan investments

• Plan Administration
o Records of annual plan administration provided by the TPA

• Additional Monitoring
o Documentation of service provider's performance against plan needs
o Minutes of any plan fiduciary meetings

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 V. Summary

• Document your “process” and have scheduled regular meetings

o Follow “Fiduciary Meeting Checklist” and “Due Diligence Checklist”

o Finalize “IPS” and Election of Self-Directed Brokerage Account

• Can purchase additional liability insurance

o ERISA permits the purchase of fiduciary liability insurance. If the insurance is

purchased with plan assets, the insurance policy must permit recourse by the
insurer against the fiduciary. Recourse allows the insurer to try to collect from the
fiduciary if a breach is determined to have occurred. A nonrecourse rider is a
supplemental insurance policy that may be available which eliminates the insurer’s
right of recourse. A nonrecourse rider costs extra and may not be paid with plan
assets

o Directors & Officers Insurance – your company’s directors and officers insurance
may or may not cover fiduciary breaches. Check the insurance policy, because
many policies specifically exclude ERISA plans.

o Errors & Omissions Insurance- “E&O” insurance protects against liability for
administrative errors and omissions. This insurance typically covers third-party
administrators, accountants and attorneys.

• Department of Labor and the IRS has jurisdiction in this area

• Two most common examples of Fiduciary Violation:

• Failure to submit deferrals on a timely basis

• Poor investment selection and monitoring process

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 VI. Disclaimer

This information is of a general and informational nature and IS NOT INTENDED TO

CONSTITUTE LEGAL OR TAX ADVICE. Rather, it is provided as a means to inform you of
current information about legislative, regulatory changes, and other information of interest.
The information is based on current interpretations of the law and is not guaranteed. Neither
the company nor its representatives give legal or tax advice. Please consult your attorney or
tax advisor for answers to specific questions.

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VII. Attachments