Part One: Fiduciary Rules
Personal liability
Any fiduciary who breaches the fiduciary responsibility provisions of the Employee Retirement Income Security Act of 1974 (ERISA) is personally liable to make good to the plan any losses suffered by the plan and return all profits made through the improper use of plan assets.
TABLE OF CONTENTS
Part 1: Fiduciary Rules
• What do I need to do if I am a fiduciary?
• Delegation of fiduciary responsibilities
• Consequences of breach of fiduciary duties
• Employee Retirement Income Security Act of 1974 (ERISA) Requirements
Part 2: Strategies to limit your liability
• Compliance with ERISA Section 404(c)
• Selection and monitoring of service providers
Part 3: Managing your fiduciary responsibilities
• Managing your fiduciary responsibilities
Keep in mind that the obligation to fulfilling one's fiduciary duties generally only arises when the fiduciary is acting in the capacity of a fiduciary. For example, a fiduciary with discretionary authority over managing the plan’s investment lineup is generally not liable for the actions of the fiduciary responsible for ensuring the plan’s Summary Plan Description is distributed because that transaction would not be considered a fiduciary function involving discretionary authority over the plan's investment lineup. The transactional nature of one’s fiduciary status is often explained using the metaphor of a fiduciary wearing his/her fiduciary "hat" at the time of a particular action
Removal of fiduciary
In appropriate cases, a fiduciary may be removed and permanently prohibited from acting as a fiduciary or from providing services to ERISA plans.
Civil penalties
Among other penalties, the DOL may assess a civil penalty equal to 20% of the amounts recovered for the plan through litigation or settlement.
Criminal prosecution
Upon a conviction for a willful violation of ERISA’s reporting and disclosure requirements, a fiduciary may be subject to fines and/or imprisonment for not more than ten years. There is also a provision in ERISA that applies to any person, not just ERISA fiduciaries, that makes coercive interference with ERISA rights a criminal offense punishable by fines and/or imprisonment for up to ten years. In addition, outside of ERISA, there are a number of criminal statutes that apply to any person, not just ERISA fiduciaries, including criminal statutes for embezzling from an ERISA plan, making false statements in ERISA documents, and taking illegal kickbacks in connection with an ERISA plan.
Cofiduciary liability
ERISA's unique cofiduciary liability provisions make each fiduciary responsible for the actions of the other plan fiduciaries but only under certain circ*mstances. As a general rule, fiduciaries aren’t responsible for the breach of another fiduciary unless:
- They participate knowingly in, or knowingly undertake to conceal, an act or omission of such other fiduciary, knowing such act or omission is a breach;
- Their failure to be prudent in the administration of their own fiduciary responsibilities enables the other fiduciary to commit a breach; or
- They have knowledge of a breach by such other fiduciary and don’t make reasonable efforts under the circ*mstances to remedy the breach.
Voluntary fiduciary correction program (VFCP)
This is a DOL program that allows affected individuals to voluntarily correct certain ERISA fiduciary duty violations, although the DOL must approve the correction. If approved, it permits the fiduciary to avoid civil ERISA penalties. The VFCP provides for the correction of certain types of violations:
- Delinquent participant contributions to retirement plans
- Certain violations involving plan loans
- Certain violations involving the purchase, sale, and exchange of property when a plan is a party to the transaction
- Payment of benefits without proper valuation of the plan assets on which the payment is based
- Certain violations involving the plan’s payment of expenses
Source: DOL Voluntary Fiduciary Correction Program Information
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