Am I a 401(k) Plan Fiduciary? ERISA Duties Explained
Most people who carry personal fiduciary liability for a company plan never asked for it. ERISA assigns the status by function, not title: if you exercise discretion over the plan, its assets, or its administration — signing the recordkeeper agreement, sitting on the committee, picking the lineup — you are a fiduciary, whether anyone told you or not.
The five core duties
- Loyalty — act solely in participants' interest, for the exclusive purpose of providing benefits and defraying reasonable expenses.
- Prudence — act with the care and skill of a knowledgeable professional. It is a standard about process: courts judge how decisions were made, not how they turned out.
- Diversification — offer a menu that lets participants manage risk.
- Follow the plan document — operate the plan as written, and keep the document current with the law.
- Pay only reasonable expenses — know what the plan pays and confirm it's reasonable for the services received.
The liability is personal
ERISA Section 409 makes fiduciaries personally liable to restore plan losses from a breach — officers have written personal checks in settlement. Fiduciary liability insurance (separate from the plan's required fidelity bond) transfers some risk, but the durable protection is a documented prudent process.
What a prudent process looks like
A committee with a charter. An investment policy statement the committee actually follows. Minutes that record deliberation, not attendance. Periodic fee and service benchmarking. Performance reviewed against the IPS. Notices out on time. None of it is exotic — it's consistent, recorded discipline, and it is what separates defensible sponsors in litigation.
What you can delegate — and what you can't
You can shift real responsibility to professionals: a 3(21) advisor or 3(38) manager takes on defined investment duties. But no arrangement erases your own duty — fiduciaries who delegate still have to prudently select and monitor the experts they hire.
It now reaches your health plan
The Johnson & Johnson litigation signaled that the scrutiny long applied to 401(k) menus has reached group health and pharmacy benefits, where most sponsors have far less documentation. Regency works both sides as an independent, fee-only consultant. We are open-architecture, and we hold every plan to the same standard for what a prudent file has to contain. That file is the defense.
Common questions
Can I really be held personally liable?
Yes. ERISA Section 409 imposes personal liability on fiduciaries for losses from a breach, and individual officers and committee members have personally contributed to settlements. A documented prudent process, backed by fiduciary liability insurance, is the practical protection.
Does hiring an advisor remove my fiduciary duty?
No. Delegating to a 3(21) or 3(38) professional shifts specific responsibilities, but you always keep the duty to prudently select that professional and monitor them. You can delegate tasks; you cannot delegate away accountability.
What is the difference between a 3(21) and a 3(38) fiduciary?
A 3(21) advisor recommends while the committee retains final decisions, sharing responsibility. A 3(38) manager is granted discretion to select and replace investments itself, transferring that specific responsibility while you continue to monitor the manager.
What documentation should our committee keep?
A charter, an investment policy statement, minutes recording actual deliberation, fee benchmarking reports, investment review materials, and proof that required participant notices went out on time. In a dispute, the record of the process is the defense.
Speak with Regency.
Questions about this topic as it relates to your plan? We welcome the conversation.