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What is Fiduciary Liability: Your Complete Overview

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Fiduciary liability extends beyond employee benefits 

Employers and program administrators commonly ask, “What is fiduciary liability?” 

IRMI defines fiduciary liability as “the responsibility on trustees, employers, fiduciaries, professional administrators, and the plan itself with respect to errors and omissions (E&O) in the administration of employee benefit programs as imposed by the Employee Retirement Income Security Act (ERISA).” 

However, fiduciary liability extends beyond employee benefit programs. The importance of fiduciary responsibility in retirement programs is often overlooked.  

In this blog post, we fill the educational gap, providing essential information on retirement plans and the liability responsibility of trustees, employers, program administrators and fiduciaries. 

Understanding fiduciary responsibility in retirement programs 

Retirement programs play a crucial role in ensuring the financial well-being of participants and beneficiaries. However, overseeing these programs comes with significant responsibilities and risks. 

What is a fiduciary? 

 Those who have any discretion over retirement programs are considered fiduciaries. Fiduciaries are legally required to act prudently and in the best interest of the participants and beneficiaries. 

3 main components of fiduciary liability 

1. The burden of prudence 

Acting "prudently" can be open to interpretation and varies depending on specific situations. This can make the role of a fiduciary challenging, as they must constantly evaluate their actions to ensure they meet the required legal standards. 

2. Personal responsibility 

Fiduciaries can be held personally accountable for any wrongdoing. This is a significant risk, considering the complexities and ambiguities involved in managing retirement programs. This is one of the reasons why organizations may consider fiduciary liability insurance options. 

3. Managing risks through internal governance 

While it is impossible to eliminate all risks, having strong internal governance and a documented review process can help manage them. These measures provide a framework for decision-making and ensure that actions taken are well-documented and justifiable. 

Are you a fiduciary overseeing a retirement program?  

Ensuring you act prudently is not only a critical aspect of your role but also a legal requirement. Contact us today for more insights into managing fiduciary responsibilities and how a fiduciary advisor can assist. We can help you walk through your current plan and answer questions. Plus, check out our quick hits webinar on fiduciary governance.

Want more out of your retirement plan? Explore our services! 

Ready to create custom solutions directly tailored to your business needs? TruePlan has you covered. When you partner with us, our team of holistic advisors functions as your trusted guide for retirement plans and employee benefit services, providing guidance and resources that move your organization forward.  

Contact us today to take the first step toward plan optimization.  

TruePlan Benefit and Retirement Advisors is a marketing name of Healthcare Community Securities Corp., member FINRA/SIPC, and an SEC Registered Investment Advisor. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Past performance is not indicative or a guarantee of future returns. 

This content is for informational purposes only. It has been partially generated from an AI language model, which may not always be exhaustive or tailored to individual circumstances. We encourage you to contact one of our experts for more information. We assume no liability arising from any use of this content.

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