Fiduciary Duties Under ERISA
In keeping with the trust law underpinnings of the statute, ERISA requires that every employee benefit plan be established and maintained pursuant to a written plan document that expressly provides for one or more named fiduciaries charged with managing and administering the plan. And, although ERISA requires that any assets of the plan be held in trust by a trustee, the statute broadly defines the term fiduciary, not just “in terms of formal trusteeship, but in functional terms of control and authority over the plan,” thus expanding the universe of persons subject to fiduciary duties – and liable for damages.
Thus, in addition to persons designated in plan documents as fiduciaries, by statute, a fiduciary is any person that “exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets.” Persons that render investment advice for a fee or other compensation are also fiduciaries of a plan. Additionally, any person that has “any discretionary authority or discretionary responsibility in the administration of such plan” is also a fiduciary. 29 U.S.C. § 1002 (emphasis added).
- Providing benefits to participants and their beneficiaries; and
- Defraying reasonable expenses of administering the plan;
- with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims;
- by diversifying the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and
- in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of ERISA.
These trust-law-based fiduciary duties of prudence and loyalty are “the highest known to the law.”
ERISA is also designed to serve its purposes of protecting plan participants and beneficiaries “by requiring the disclosure and reporting to participants and beneficiaries of financial and other information with respect” to their plans.
In addition to their specific statutory disclosure duties, ERISA fiduciaries also have a duty not to mislead participants or to misrepresent the terms or administration of the Plan, as well as an affirmative duty to accurately disclose information that could materially impact benefits, regardless of whether or not a participant asks for that information.
It is, therefore, a breach of fiduciary duty to mislead plan participants, regardless of whether the statements or omissions were made negligently or intentionally.
ERISA also contains provisions flatly prohibiting certain transactions between a plan and an interested party, referred to as a “party in interest,” unless they are proven to be exempted under the statute. These prohibited transactions include any transfer of assets from a plan to a party in interest, as well as any self-dealing transactions involving plan assets that are for the benefit of the fiduciary or any other party whose interests are adverse to the plan or its participants and beneficiaries.
A fiduciary that breaches his or her duties to the plan for which it serves as fiduciary is personally liable to make good to the plan any losses resulting from a breach of those duties and to restore to the plan any profits the fiduciary received using assets of the plan by the fiduciary and can be subject to injunctive and other appropriate equitable relief.
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