Fiduciary and Reporting Requirements: Duties, Prohibited Transactions, and Filings
Fiduciary status and duties
A fiduciary is anyone who exercises discretionary authority or control over plan management or assets, or who renders investment advice for a fee. Fiduciaries owe duties of loyalty and prudence, must follow the plan documents, must diversify investments, and must act solely in participants' interest. Candidates should understand co-fiduciary liability and the concept of allocating responsibilities among named fiduciaries.
Prohibited transactions and exemptions
Certain dealings between the plan and parties in interest are prohibited: sales, loans, and use of plan assets for personal benefit. Know that the prohibited transaction rules are separate from the fiduciary duty rules, and that statutory or administrative exemptions may permit otherwise prohibited arrangements.
Reporting and disclosure
Know the major filings and notices: the annual return/report, the summary annual report, the summary plan description and summaries of material modifications, participant fee disclosures, and the annual funding notice for defined benefit plans. Understand who files, when, and what participants are entitled to receive.
Traps
Questions often blur the line between a fiduciary breach and a prohibited transaction, or assume that following the plan document excuses an imprudent decision. Another trap: assuming a service provider is never a fiduciary - it depends on the discretion exercised.
Rule of thumb
For any scenario, ask: Did the person have discretion? Did they act prudently and loyally? Was the transaction with a party in interest? Then check whether the required filing or notice was made.