The Department of Labor today issued questions and answers relating
to certain aspects of fiduciary responsibility under the Act, thereby
supplementing ERISA IB 75-5 (29 CFR 2555.75-5) which was issued on June
24, 1975, and published in the Federal Register on July 28, 1975 (40 FR
31598).
Pending the issuance of regulations or other guidelines, persons may
rely on the answers to these questions in order to resolve the issues
that are specifically considered. No inferences should be drawn
regarding issues not raised which may be suggested by a particular
question and answer or as to why certain questions, and not others, are
included. Furthermore, in applying the questions and answers, the effect
of subsequent legislation, regulations, court decisions, and
interpretive bulletins must be considered. To the extent that plans
utilize or rely on these answers and the requirements of regulations
subsequently adopted vary from the answers relied on, such plans may
have to be amended.
An index of the questions and answers, relating them to the
appropriate sections of the Act, is also provided.
Index
Key to question prefixes: D--refers to definitions; FR--refers to
fiduciary responsibility.
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Section No. Question No.
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3(21)(A).................................. D-2, D-3, D-4, D-5.
3(38)..................................... FR-15.
402(c)(1)................................. FR-12.
402(c)(2)................................. FR-15.
402(c)(3)................................. FR-15.
403(a)(2)................................. FR-15.
404(a)(1)(B).............................. FR-11, FR-17.
405(a).................................... FR-13, FR-14, FR-16.
405(c)(1)................................. FR-12, FR-15.
405(c)(2)................................. D-4, FR-13, FR-14, FR-16.
412....................................... D-2.
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Note: Questions D-2, D-3, D-4, and D-5 relate to not only section
3(21)(A) of title I of the Act, but also section 4975(e)(3) of the
Internal Revenue Code (section 2003 of the Act). The Internal Revenue
Service has indicated its concurrence with the answers to these
questions.
D-2 Q: Are persons who have no power to make any decisions as to
plan policy, interpretations, practices or procedures, but who perform
the following administrative functions for an employee benefit plan,
within a framework of policies, interpretations, rules, practices and
procedures made by other persons, fiduciaries with respect to the plan:
(1) Application of rules determining eligibility for participation
or benefits;
(2) Calculation of services and compensation credits for benefits;
(3) Preparation of employee communications material;
(4) Maintenance of participants' service and employment records;
(5) Preparation of reports required by government agencies;
(6) Calculation of benefits;
(7) Orientation of new participants and advising participants of
their rights and options under the plan;
(8) Collection of contributions and application of contributions as
provided in the plan;
(9) Preparation of reports concerning participants' benefits;
(10) Processing of claims; and
(11) Making recommendations to others for decisions with respect to
plan administration?
A: No. Only persons who perform one or more of the functions
described in section 3(21)(A) of the Act with respect to an employee
benefit plan are fiduciaries. Therefore, a person who performs purely
ministerial functions such as the types described above for an employee
benefit plan within a framework of policies, interpretations, rules,
practices and procedures made by other persons is not a fiduciary
because such person does not have discretionary authority or
discretionary control respecting management of the plan, does not
exercise any authority or control respecting management or disposition
of the assets of the plan, and does not render investment advice with
respect to any money or other property of the plan and has no authority
or responsibility to do so.
However, although such a person may not be a plan fiduciary, he may
be subject to the bonding requirements contained in section 412 of the
Act if he handles funds or other property of the plan within the meaning
of applicable regulations.
The Internal Revenue Service notes that such persons would not be
considered plan fiduciaries within the meaning of section 4975(e)(3) of
the Internal Revenue Code of 1954.
D-3 Q: Does a person automatically become a fiduciary with respect
to a plan by reason of holding certain positions in the administration
of such plan?
A: Some offices or positions of an employee benefit plan by their
very nature require persons who hold them to perform one or more of the
functions described in section 3(21)(A) of the Act. For example, a plan
administrator or a trustee of a plan must, be the very nature of his
position, have ``discretionary authority or discretionary responsibility
in the administration'' of the plan within the meaning of section
3(21)(A)(iii) of the Act. Persons who hold such positions will therefore
be fiduciaries.
Other offices and positions should be examined to determine whether
they involve the performance of any of the functions described in
section 3(21)(A) of the Act. For example, a plan might designate as a
``benefit supervisor'' a plan employee whose sole function is to
calculate the amount of benefits to which each plan participant is
entitled in accordance with a mathematical formula contained in the
written instrument pursuant to which the plan is maintained. The benefit
supervisor, after calculating the benefits, would then inform the plan
administrator of the results of his calculations, and the plan
administrator would authorize the payment of benefits to a particular
plan participant. The benefit supervisor does not perform any of the
functions described in section 3(21)(A) of the Act and is not,
therefore, a plan fiduciary. However, the plan might designate as a
``benefit supervisor'' a plan employee who has the final authority to
authorize or disallow benefit payments in cases where a dispute exists
as to the interpretation of plan provisions relating to eligibility for
benefits. Under these circumstances, the benefit supervisor would be a
fiduciary within the meaning of section 3(21)(A) of the Act.
The Internal Revenue Service notes that it would reach the same
answer to this question under section 4975(e)(3) of the Internal Revenue
Code of 1954.
D-4 Q: In the case of a plan established and maintained by an
employer, are members of the board of directors of the employer
fiduciaries with respect to the plan?
A: Members of the board of directors of an employer which maintains
an employee benefit plan will be fiduciaries only to the extent that
they have responsibility for the functions described in section 3(21)(A)
of the Act. For example, the board of directors may be responsible for
the selection and retention of plan fiduciaries. In such a case, members
of the board of directors exercise ``discretionary authority or
discretionary control respecting management of such plan'' and are,
therefore, fiduciaries with respect to the plan. However, their
responsibility, and, consequently, their liability, is limited to the
selection and retention of fiduciaries (apart from co-fiduciary
liability arising under circumstances described in section 405(a) of the
Act). In addition, if the directors are made named fiduciaries of the
plan, their liability may be limited pursuant to a procedure provided
for in the plan instrument for the allocation of fiduciary
responsibilities among named fiduciaries or for the designation of
persons other than named fiduciaries to carry out fiduciary
responsibilities, as provided in section 405(c)(2).
The Internal Revenue Service notes that it would reach the same
answer to this question under section 4975(e)(3) of the Internal Revenue
Code of 1954.
D-5 Q: Is an officer or employee of an employer or employee
organization which sponsors an employee benefit plan a fiduciary with
respect to the plan solely by reason of holding such office or
employment if he or she performs none of the functions described in
section 3(21)(A) of the Act?
A: No, for the reasons stated in response to question D-2.
The Internal Revenue Service notes that it would reach the same
answer to this question under section 4975(e)(3) of the Internal Revenue
Code of 1954.
FR-11 Q: In discharging fiduciary responsibilities, may a fiduciary
with respect to a plan rely on information, data, statistics or analyses
provided by other persons who perform purely ministerial functions for
such plan, such as those persons described in D-2 above?
A: A plan fiduciary may rely on information, data, statistics or
analyses furnished by persons performing ministerial functions for the
plan, provided that he has exercised prudence in the selection and
retention of such persons. The plan fiduciary will be deemed to have
acted prudently in such selection and retention if, in the exercise of
ordinary care in such situation, he has no reason to doubt the
competence, integrity or responsibility of such persons.
FR-12 Q: How many fiduciaries must an employee benefit plan have?
A: There is no required number of fiduciaries that a plan must have.
Each plan must, of course, have at least one named fiduciary who serves
as plan administrator and, if plan assets are held in trust, the plan
must have at least one trustee. If these requirements are met, there is
no limit on the number of fiduciaries a plan may have. A plan may have
as few or as many fiduciaries as are necessary for its operation and
administration. Under section 402(c)(1) of the Act, if the plan so
provides, any person or group of persons may serve in more than one
fiduciary capacity, including serving both as trustee and administrator.
Conversely, fiduciary responsibilities not involving management and
control of plan assets may, under section 405(c)(1) of the Act, be
allocated among named fiduciaries and named fiduciaries may designate
persons other than named fiduciaries to carry out such fiduciary
responsibilities, if the plan instrument expressly provides procedures
for such allocation or designation.
FR-13 Q: If the named fiduciaries of an employee benefit plan
allocate their fiduciary responsibilities among themselves in accordance
with a procedure set forth in the plan for the allocation of
responsibilities for operation and administration of the plan, to what
extent will a named fiduciary be relieved of liability for acts and
omissions of other named fiduciaries in carrying out fiduciary
responsibilities allocated to them?
A: If named fiduciaries of a plan allocate responsibilities in
accordance with a procedure for such allocation set forth in the plan, a
named fiduciary will not be liable for acts and omissions of other named
fiduciaries in carrying out fiduciary responsibilities which have been
allocated to them, except as provided in section 405(a) of the Act,
relating to the general rules of co-fiduciary responsibility, and
section 405(c)(2)(A) of the Act, relating in relevant part to standards
for establishment and implementation of allocation procedures.
However, if the instrument under which the plan is maintained does
not provide for a procedure for the allocation of fiduciary
responsibilities among named fiduciaries, any allocation which the named
fiduciaries may make among themselves will be ineffective to relieve a
named fiduciary from responsibility or liability for the performance of
fiduciary responsibilities allocated to other named fiduciaries.
FR-14 Q: If the named fiduciaries of an employee benefit plan
designate a person who is not a named fiduciary to carry out fiduciary
responsibilities, to what extent will the named fiduciaries be relieved
of liability for the acts and omissions of such person in the
performance of his duties?
A: If the instrument under which the plan is maintained provides for
a procedure under which a named fiduciary may designate persons who are
not named fiduciaries to carry out fiduciary responsibilities, named
fiduciaries of the plan will not be liable for acts and omissions of a
person who is not a named fiduciary in carrying out the fiduciary
responsibilities which such person has been designated to carry out,
except as provided in section 405(a) of the Act, relating to the general
rules of co-fiduciary liability, and section 405(c)(2)(A) of the Act,
relating in relevant part to the designation of persons to carry out
fiduciary responsibilities.
However, if the instrument under which the plan is maintained does
not provide for a procedure for the designation of persons who are not
named fiduciaries to carry out fiduciary responsibilities, then any such
designation which the named fiduciaries may make will not relieve the
named fiduciaries from responsibility or liability for the acts and
omissions of the persons so designated.
FR-15 Q: May a named fiduciary delegate responsibility for
management and control of plan assets to anyone other than a person who
is an investment manager as defined in section 3(38) of the Act so as to
be relieved of liability for the acts and omissions of the person to
whom such responsibility is delegated?
A: No. Section 405(c)(1) does not allow named fiduciaries to
delegate to others authority or discretion to manage or control plan
assets. However, under the terms of sections 403(a)(2) and 402(c)(3) of
the Act, such
authority and discretion may be delegated to persons who are investment
managers as defined in section 3(38) of the Act. Further, under section
402(c)(2) of the Act, if the plan so provides, a named fiduciary may
employ other persons to render advice to the named fiduciary to assist
the named fiduciary in carrying out his investment responsibilities
under the plan.
FR-16 Q: Is a fiduciary who is not a named fiduciary with respect to
an employee benefit plan personally liable for all phases of the
management and administration of the plan?
A: A fiduciary with respect to the plan who is not a named fiduciary
is a fiduciary only to the extent that he or she performs one or more of
the functions described in section 3(21)(A) of the Act. The personal
liability of a fiduciary who is not a named fiduciary is generally
limited to the fiduciary functions, which he or she performs with
respect to the plan. With respect to the extent of liability of a named
fiduciary of a plan where duties are properly allocated among named
fiduciaries or where named fiduciaries properly designate other persons
to carry out certain fiduciary duties, see question FR-13 and FR-14.
In addition, any fiduciary may become liable for breaches of
fiduciary responsibility committed by another fiduciary of the same plan
under circumstances giving rise to co-fiduciary liability, as provided
in section 405(a) of the Act.
FR-17 Q: What are the ongoing responsibilities of a fiduciary who
has appointed trustees or other fiduciaries with respect to these
appointments?
A: At reasonable intervals the performance of trustees and other
fiduciaries should be reviewed by the appointing fiduciary in such
manner as may be reasonably expected to ensure that their performance
has been in compliance with the terms of the plan and statutory
standards, and satisfies the needs of the plan. No single procedure will
be appropriate in all cases; the procedure adopted may vary in
accordance with the nature of the plan and other facts and circumstances
relevant to the choice of the procedure.
[40 FR 47491, Oct. 9, 1975. Redesignated at 41 FR 1906, Jan. 13, 1976]
