A Q&A on fiduciary roles and responsibilities

Responses to plan professionals' fiduciary questions from John Hancock ERISA experts. These questions were submitted by attendees of our "Understanding the roles and responsibilities of a plan fiduciary" webinar.

Questions on identifying fiduciaries

If someone in a plan sponsor’s HR department provides investment advice to an employee, doesn’t that HR employee become an inadvertent advisor and therefore a fiduciary? And doesn’t this apply even if the ones giving advice aren’t compensated?
In general, advice from one employee to another, without compensation, should not result in fiduciary status. However, to the extent the advice is provided on a regular basis or is a job responsibility, the HR person should then be considered a fiduciary.

What’s the risk in a plan sponsor not selecting 3(21) services or 3(38) services?  In other words, what happens if sponsors perform these services themselves? 
The risk is that the plan sponsor will not meet the prudent expert standard—which may result in a fiduciary breach. 

(See this viewpoint for details on ERISA Section 3(21) and 3(38) fiduciary duties.)

Is a financial advisor of a plan automatically a 3(21) fiduciary?
No, it depends on the contract and services rendered.

If advisors help the plan sponsor with the fund lineup and recommend a 3(38) fiduciary, are they considered fiduciaries or acting in a fiduciary role?
If advisors are making recommendations on funds and the hiring of fiduciaries, then they’re probably acting in a fiduciary capacity. 

Is there a move for plan sponsors to add 3(38) services in order to protect themselves from liability?
We’re not sure this is a movement, but a 3(38) fiduciary may work for some plan sponsors, but not for all.

If a third-party administrator (TPA) is under contract as a plan’s 3(16) administrator, and one of the TPA’s employees signs and files a Form 5500 for that plan, does that make the employee a fiduciary?
No, the employee isn’t the fiduciary, but is merely signing on behalf of the TPA, who is the fiduciary. 

(Read more about the responsibilities of ERISA Section 3(16) plan administrators and Section 403(a) trustees.)

Does the person who signs the Form 5500 for a company retirement plan have a fiduciary responsibility to the plan and its participants?
The Form 5500 must be signed by the plan administrator, who is a plan fiduciary. 

Are TPAs fiduciaries if they have signing authority on the plan?
It depends on the service agreement, but if TPAs are exercising discretion, such as signing a Form 5500, then they’re probably acting in a fiduciary capacity.

Questions on procedures and practices

A TPA told me that the U.S. Department of Labor (DOL) isn’t concerned with plan expenses paid by the plan sponsor, only those paid by the plan and participants. Would you agree this is the case?
Yes, the DOL is only concerned with the use of plan assets.

How do you make sure small plans fulfill their fiduciary responsibilities?
Plan sponsors of all size plans should seek fiduciary education through webinars, in-person training, and other available means.

For small plans, if a sponsor sends in salary deferrals after five business days, is it automatically considered late and required to be listed on the 5500 as late deferrals? In other words, do these deferrals fall outside the safe harbor timeframe?
For small plans—those with fewer than 100 participants—the requirement is seven business days.   

What’s the deposit requirement for plans with over 100 participants?
For larger plans, a facts and circumstances test is applied, which is based on the plan sponsor’s ability to remit the deposits. Consistency is the key requirement. 

At what plan size do plan sponsors tend to start opting for fiduciary liability insurance?
Plan size isn’t really the focus. Fiduciary liability insurance is recommended for any size plan.

Are plans with under $2 million in assets less likely to be randomly audited?
Regulatory audits are based more on multiple factors and less about asset size.

How far back can the IRS go in conducting an audit?
An audit can go back three years from the date the Form 5500 was filed for a given plan year.

Is it important to have a trust company?
Generally, it’s important to have either a trust company or a custodian handle plan transactions, tax withholding, and trust reporting.

Can plan restatements be considered a plan expense and paid out of plan assets, or must the client pay for the restatement with company funds?
It depends on the work involved in the plan restatement. If the plan is restated for only required changes and to maintain its qualification status, then the plan restatement cost should be eligible for payment from plan assets. Any additional discretionary changes would be considered settlor functions, which must be paid by the plan sponsor.

If an employer’s payroll company provides a price break in return for 401(k) business, is this a conflict of interest on the employer’s part?
Based on the provided information, this sounds like a conflict of interest.

Any fiduciary issues if a plan sponsor selects a new recordkeeper based on the provider’s offer of a discount on another service, such as payroll?
Based on the provided information, this seems to be a conflict of interest.

Is it a prohibited transaction if an advisor sells an insurance policy along with investments to a plan when acting as an IAR (investment advisory representative)?
Yes, unless you can satisfy a prohibited transaction exemption. See DOL 2020-02.

What’s your opinion, and the DOL’s view, of the inclusion of self-directed brokerage accounts (SDBAs) in terms of fiduciary liability? Additionally, if the SDBA is excluded from plan expenses and advisory compensation, what risk would fiduciaries have if they have assets in the SDBA?
An SDBA is not exempt from fiduciary oversight. The plan fiduciary still has a duty of prudence and a duty of loyalty as it relates to the brokerage program.

Regarding fiduciary liability insurance, are individuals typically named in the policy, or just the company, or something like “401k committee members”?
It’s recommended to name either company positions (e.g., CFO) or committee members.

What are your thoughts on one trustee plans versus co-trustee plans?
The answer depends on the facts and circumstances. For example, if a plan held company stock, it might be beneficial to have co-trustees—one to handle the stock and one for the core investments.

How often does a summary plan description (SPD) need to be mailed to participants?
An SPD should be distributed at least every 5 years if a material change has occurred; otherwise, it should be distributed at least every 10 years.

When you’re talking about missing participants, are you specifically referring to terminated employees with a balance in the plan?
For the most part, missing participants refers to terminated employees with a balance in the plan; however, there’s still a responsibility to keep all employee records updated, whether active or terminated.


This is not intended to be an exhaustive review of fiduciary responsibilities under ERISA. It highlights key issues that plan fiduciaries must be aware of. John Hancock is not in a position to provide you with legal advice concerning your plan or your role as plan fiduciary, and the information included here should not be taken as such. If legal advice or other expert assistance is required, please consult your legal counsel.