Am I a Fiduciary? (continued)
Someone that is compensated via commission cannot also be a fiduciary as the recommendations
made by that person might be influenced by the amount of commission. This is a conflict
of interest and considered a “prohibited transaction”. A person that claims to share
your responsibility as a fiduciary that is paid a commission and has the ability
to make decisions (as opposed to providing you with the information so you can make
a decision) could cause disqualification of your plan.
Hiring a trustee (trust company) can save you work and time and they
can be a co-fiduciary but this relationship does not negate the potential liability
of the fiduciary(s) at the sponsoring company. Neither do “fiduciaries warranties”
relieve the company fiduciaries of their liability.
My provider says they are a co-fiduciary. Are they? Just because your provider
provides a written agreement to become a co-fiduciary doesn’t always mean much.
Often within these agreements the scope of their liability is paired down to the
point where the declaration of co-fiduciary status is virtually worthless.
A co-fiduciary is anyone who has and exercises control over the plan.
Does an advisor make investment decisions for the plan on a discretionary basis?
Can the trustee distribute money from the plan without the plan sponsors instruction?
These are examples of those who would be co-fiduciaries.
Activities like this make the person engaged in these activities a fiduciary
whether or not they specifically agree to that status or not.
Obviously, if you do retain the services of someone that will perform a fiduciary
role it is necessary to obtain a written agreement stating this as well as satisfying the requirement listed above.
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