Multiple Employer Plans: The Platinum Standard

In my last four columns, I described how the sponsor of a qualified retirement plan such as a 401(k) plan--the "sponsor" actually being real flesh-and-blood people who serve as trustees and other named and functional fiduciaries of the plan--can insulate itself from virtually all day-to-day fiduciary investment risk as well as operational/administrative risk to which the sponsor would otherwise be subject as a result of sponsoring the plan.

The U.S. Department of Labor (DOL) provides, in its DOL Advisory Opinion 2002-06A (issued July 3, 2002), that a plan sponsor (typically through the board of directors of the sponsor/employer) has the power, pursuant to ERISA section 402(b), to delegate limited-scope duties to a specialized fiduciary responsible for administration of the plan (an ERISA section 3(16) Plan Administrator); one responsible for selecting, monitoring, and (if necessary) replacing the investment options offered in the plan (an ERISA section 3(38) Investment Manager); or one responsible for trustee duties defined in the plan (an ERISA section 403(a) Plan Trustee).

A plan sponsor also has the power, pursuant to ERISA section 402(b), to delegate limited-scope duties to a specialized ERISA section 3(21) fiduciary responsible for a narrowly defined issue where discretion can be exercised, such as the determination of whether or not it's prudent to hold the company stock of a plan sponsor as an investment option in the company's plan.

Alternatively, a plan sponsor can radically simplify things for itself. Instead of continuing to bear the inherent responsibilities associated with sponsoring a retirement plan, bearing the liability for parceling out some (or all) such duties to specialized fiduciaries on its own--which takes substantial time, investigation, due diligence, monitoring, etc.--the plan sponsor can simply off-load liability for such duties by delegating them all to a full-scope, professional, independent ERISA section 3(21) named fiduciary.