Evan M. Levine, ChFC's Answers and Guides

Evan, does that mean every officer of the company is a fiduciary? At one point as you go down the organizational structure does an employee of the company not become a fiduciary?

Hey Ryan: It's not a matter of function or title - it's a matter of involvement. A plan sponsor or trustee is certainly a fiduciary. Others that are involved in the plan; say an investment committee member or an HR director who remits money to the investment manger, et cetera.... would most likely be considered a fiduciary as well. Best of luck!

Evan, I bet there are a lot of corporate officers that do not realize their fiduciary status!

Evan, that makes sense. I don't know what 3(38) means but we do have an advisor who meets with us every year to help with the plan. Do you think that lowers our fiduciary responsibility?

Melissa, 3(38) is just a tax code... like 401(k) or 529. The advisor meeting with you does not, in iteself, lower your fiduciary responsibility. You can look at your actual agreement to learn more. If it is with a large wirehouse, bank or insurance company, it likely stattes that all fiduciary duty lies with the plan sponser not the providor. You can only lower your fiduciary responsiblity be delegating it contractually to a 3(38) defined manager. It would typically be an independant, smaller or mid-sized, fee-based RIA ( Registered investment advisor) firm that operates in that capacity.

Thank you! This is very helpful.

Thanks Evan. Recent market turmoil piqued my interest in this question, and CDs appealed to me to their known-interest nature. Are there alternative investments and/or investment strategies that you would suggest?

Hi David, it depends...your investments should be aligned with your goals, that is what you are investing for. If a goal is short term, say less than 3 years out or less ( A down-payment on a house for example) CD'S or Ultra short bonds are the appropriate vehicle. There aren't many alternatives. Unfortunately the rates on these investments are peanuts these days... but we have to live with it. If you start seeking higher returns, you will assume correspondingly higher risk. Thanks and please don't kill the messenger!

Mary Ann, I would be asking for the 408(b)2 disclosure from both firms. These fee disclosures will spell out all who is being paid inside and outside of the plan. My history with both firms has not been very good relative to fees in the marketplace. One caveat to this will be the size of your plan and average account balances. Most plans are priced on these factors and therefore if you have a micro-plan (under $1m in assets) and a large employee group, then the use of an insurance company may make sense. Otherwise you will be paying much higher fees then you may need to. Why? The insurance company needs to earn fees, the broker will need to be paid, the record keeper and finally the mutual fund company and maybe an added outside ERISA 3(38) manager. The insurance company is just another middle man directing the fee structure. You can un-bundle these fees and have an outside consultant provide an unbiased plan benchmarking analysis on any of these platforms.

If you go forward on your own then be ready to do some serious digging into the fees. Unfortunately the fee structures are very complex and not matter what is shown to you as the summary cost, do not trust it 100% - make sure you READ the highlight the 408(b)2 disclosure from each firm and compare against the summary they are providing. Many firms will now only show you the costs that are directly related to the plan and any cost that could be "participant directed" (if an ERISA 3(38) manager is offered for additional fees, etc) is not provided to you on the summary page. It is buried in the disclosure. This is a new trend ever since implementation of the new fee disclosure rules on July 1, 2012.