Gain a Professional Partner with an Independent Fiduciary for Your 401(k) Plan

Written by Smart Investor | 10 May 2010

Delegating most of your fiduciary responsibilities for your corporate retirement plan can limit your liabilities and free up your time for other business matters.

It can feel scary to rely only on corporate resources to fulfill your fiduciary duties to your 401(k) plan. You're focused on growing your business. You don't have time to become an expert on ERISA (Employee Retirement Income Security Act of 1974) or how to manage a defined contribution retirement plan. This is why you should consider delegating some of your fiduciary responsibility.

You can outsource most fiduciary responsibilities

Company owners—and other company employees who serve as fiduciaries—will always have the duty to monitor other plan fiduciaries. But you can delegate much of your fiduciary duty to carefully selected and monitored independent fiduciaries.

In fact, some experts argue that the company has a fiduciary duty under the Prudent Expert Rule to hire an independent fiduciary, if owners and employees lack extensive expertise in fiduciary matters. ERISA holds fiduciaries to the high standard of a Prudent Expert—not simply a Prudent Person. ERISA explains that this requires “acting with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use.”

Your independent fiduciary can assume all day-to-day investment and administrative duties, including selecting the menu of investment options and hiring/firing providers. The fiduciary's goal is to optimize plan participants’ results, while minimizing personal liability exposure through risk management.

Make sure your fiduciary is qualified

You need an independent fiduciary who truly understands the meaning of "fiduciary," so they can accurately assess and manage your risks. One measure of this is a credential such the Accredited Investment Fiduciary® (AIF®) designation. The AIF® designation falls under the Centre for Fiduciary Excellence, an independent global assessment and certification organization. This ensures that standards are set high. The Accredited Investment Fiduciary Analyst ® (AIFA®) designation is an even higher standard of excellence, as AIFA’s are authorized to conduct third party assessments of retirement plans to evaluate their success in meeting the requirements of the US Department of Labor and the standards of the Centre for Fiduciary Excellence.

If you'd like to learn more about delegating your fiduciary responsibilities, please call me at 916-435-2100 or email me at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . I'd be happy to talk with you about how you can protect yourself and your employees.


Investment advice offered through Smart Investor, a Registered Investment Adviser.