Fiduciary Definition

The Employee Retirement Income Security Act of 1974 (“ERISA”) defines the term “Fiduciary” to include any person who:

  • Exercises any discretionary authority or control with respect to plan assets.
  • Renders investment advice for a fee.
  • Has discretionary authority or responsibility in the administration of the plan.

A fiduciary, with respect to a retirement plan, must act solely in the interest of the participants and beneficiaries for the exclusive purpose of:

  • Providing benefits to participant and their beneficiaries.
  • Ensure reasonable expenses for administration of the plan.

An employer who sponsors a retirement plan generally bears all fiduciary liability for the plan. This includes choosing vendors, selecting a fund line up, monitoring the investments and operation/administration of the plan. Many plan sponsors mistakenly assume that hiring outside vendors (Financial Advisor, Recordkeeper and TPA) relieves them of fiduciary liability, however, in reality, these outside vendors are usually not considered a fiduciary.

National Administration

Of these fiduciary solutions, only 3(16) focuses on the administration or operational aspects of the plan. 95% of plan defects penalized by the Department of Labor (DOL) fall under Section 3(16).

Why Should You Be Concerned About 3(16) At This Time?

  • 70.14% of plans audited by the DOL are out of compliance (7 year average) and have resulted in fines or penalties.
  • In 2017:
  • 1,707 investigations were closed
  • 1,114 found to be in violation
  • $1.1 billion collected by the DOL in monetary recoveries/penalties
  • 7.03 million website visits to DOL/EBSA website
  • 174,603 informal inquiries by participants
  • Opened 617 cases from DOL inquiries
  • Netted $418.7 million in monetary recoveries
  • 23,442 Voluntary Correction and Delinquent Filer Programs

For more information on the Employee Benefits Security Administration (EBSA) and their investigations, click here.

Fines/Penalties:

  • Fine by the DOL for each day Form 5500 is late . . . . . . . . $2,097/day.
  • Fine by the IRS for each day Form 5500 is late . . . . . . . . . . $25/day - Maximum of $15,000.
  • Fine for not providing SAR to participants . . . . . . . . . . . . . . $147/day. Criminal if willful.
  • Fine for not providing SPD to participants . . . . . . . . . . . . . . $147/day/participant.
  • Fine for not providing SMM to participants . . . . . . . . . . . . $147/day/participant.
  • Penalty for not supplying Safe Harbor Notice . . . . . . . . . . Operational failure (possible disqualification).
  • Fine for not supplying Blackout Notice . . . . . . . . . . . . . . . . . . $131/day/required recipient.
  • Not providing Automatic Contribution Notice . . . . . . . . . . $1,632/day.
  • Penalty for not providing Fee Disclosure . . . . . . . . . . . . . . . . Breach of fiduciary duty, penalties are probable.
  • Any individual who willfully violates any provision of Part 1 of Title 1 of ERISA shall on conviction be fined not more than $100,000 or imprisoned not more than 10 years, or both.
  • A penalty up to $10,000, 5 years imprisonment, or both, may be imposed for making any false statements or representation of fact. Knowing it to be false, or knowingly concealing or not disclosing any fact required by ERISA.

We are Here to Protect You!

3(16) Fiduciary Solutions, Inc. will act as fiduciary for the following administrative functions:

  • 1) Eligibility determination
  • 2) Send out employee newly eligible kits to employee homes
  • 3) Authorize hardship and discretionary distribution requests
  • 4) Authorize plan loan requests
  • 5) Establish plan design
  • 6) Sign and file Form 5500
  • 7) Determine qualification of DRO’s
  • 8) Interpret plan terms
  • 9) Verify Fidelity Bond coverage each year
  • 10) Verify contributions are being deposited timely
  • 11) Verify loan activity
  • 12) Provide Annual Fee Summary
  • 13) Integrate with payroll provider
  • 14) Verify match calculations
  • 15) TPA Compliance Testing certified
  • 16) Send out notices to employee homes
    • SPD’s
    • SMM’s
    • QDIA Notices
    • Safe Harbor Notices
    • Automatic Contribution Account Notices
    • SAR’s
    • Blackout Notices
    • Fee Disclosure
    • 204(h) Notices