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I am the CFO of my company and we offer a 401k plan, how do I know if I am a fiduciary?

I am new to the company and was not involved in setting up the plan, but I do take part in the meeting with our plan advisor every year and occasionally answer questions from employees. Any advice you can offer would be greatly appreciated.

Jan 04, 2012 by Mel from Cambridge, MA in  |  Flag
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26 votes

The answer is: MAYBE

In general terms it’s going to come down to the involvement of the CFO in the plan. If one has discretionary authority or control with regard to the management of the plan or its assets, or any discretionary authority or responsibility with regard to the administration of the plan the answer is almost assuredly yes. The Foundation for Fiduciary Studies states, “In the case of a 401k this is someone managing the assets of another person and stands in a special relationship of trust, confidence, and/or legal responsibility.” The Department of Labor expands thru the Employee Retirement Income Security Act (ERISA) under section Section 3(21), ”The employer and its officers and directors may be considered plan fiduciaries to the extent they act or serve in a capacity by performing functions that are covered in ERISA’s definition of a plan fiduciary. Plan fiduciaries generally include plan trustees, plan administrators, investment managers, and members of a plan’s investment committee.”

Taking the ambiguity out of your situation can generally be mediated by working with an expert in defined contribution area. It’s important to seek out an advisory that will put in writing their fiduciary responsibilities with the plan. You’ll find many advisors will outsource the Fiduciary responsibility to a third party… While it can be prudent in certain situations, outsourcing can be a sign that your not working with a specialist in the arena. Once you establish you are working with an expert, with certainty, they will advise and assist with regards to putting an investment policy statement (IPS) in place. A well written IPS provides a company with a blueprint for its investment goals, outlines responsibilities, specifies who is a fiduciary and details prudent standards for selecting, monitoring and replacing managers.

Please see ERISA Act Section 3(21), which contains the definition and additional information.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. If you have additional comments or questions, please contact me directly as per my firms' compliance policy I am prohibited from responding. LPL Tracking #1-035421

Comment   |  Flag   |  Jan 18, 2012 from Cowan Heights, CA

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If you are a plan sponsor, you are serving as a fiduciary - UNLESS you have contractually delegated that function to an investment manager that has acknowledged fiduciary responsibility under ERISA section 3(38). Good luck!

View all 6 Comments   |  Flag   |  Jan 05, 2012 from Port Washington, NY
Evan M. Levine, ChFC

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.

Flag |  Jan 09, 2012 near Port Washington, NY

Evan, just a point of clarity. Fiduciary duties cannot be totally contracted away under ERISA. If a plan fiduciary contracts with another service provider to perform some fiduciary act(s), the hiring fiduciary still has a Duty to Monitor. This is common trap I've seen too many employers fall in over the years.

Flag |  Nov 28, 2014 near Arlington, TX

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Allan Henriques Level 18


Without knowing the specific details of your situation, it’s hard to say whether you are a fiduciary or not. Based on the information you’ve provided, though, it sounds like you might be.

Generally, there are a couple of things you can do to determine if you are a fiduciary. Ask yourself the following questions. If you answer “yes” to any of them, you’re a fiduciary.

Are you named in plan documents as a fiduciary? This is a no-brainer. If you’re named in your 401(k) plan documents as a fiduciary, then you fall into the category known as “named fiduciaries.”

Do you exercise control over the management or administration of the plan or its assets? According to the Department of Labor, fiduciaries typically include, ”the trustee, investment advisers, and all individuals exercising discretion in the administration of the plan, all members of a plan’s administrative committee (if it has such a committee), and those who select committee officials.”

Do you provide ongoing investment management or advice to the plan or to plan participants? This question isn't likely to apply to many corporate employees. But it’s a good reason to be careful before offering any informal investment advice to your colleagues or employees.

Do you select or supervise other plan fiduciaries? This question gives managers a good reason to examine the meaning of “fiduciary” even if they lack direct influence over their company’s retirement plan.

1 Comment   |  Flag   |  Feb 08, 2012 from Rocklin, CA

Great framework. Thanks Allan.

Flag |  Feb 08, 2012 near San Diego, CA

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7 votes

The answer is "most likely" because of your position and "maybe!" I've seen situations where the CFO is NOT responsible for the plan, but rather, a retirement committee of other leadership positions or the CEO and HR director were instead. A lot of the fiduciary tests relate to control. Here's a quick question as a starting point: can you make changes to the plan without having to ask anyone else's permission?

If not, check the other definitions in Allan's post, and here is the DOL's guide which also might assist! http://www.dol.gov/ebsa/publications/fiduciaryresponsibility.html Ultimately, run it by an ERISA attorney if you still aren't sure.

In these answers, there's talk of "outsourcing" such as using an RIA (advisory firm), bank, or insurance company under section 3(38) of ERISA to have discretion over the investments, but ultimately, it's still someone's duty to monitor that service provider that you outsourced to. You can share liability, but you can't fully get rid of it. Your ERISA attorney will have a lot to say in this area.

For educational purposes only. Not to be construed as legal or tax advice.

Comment   |  Flag   |  Feb 19, 2013 from Alexandria, VA

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3 votes

In general, if you have anything to do with the 401(k) plan, for example, you are listed as the contact for the plan in your 5500 or plan documents, you have fiduciary liabilities/duties. The best way to mitigate this liability is to work with the plan provider, a TPA, and financial professional to consult on your plan with you.

1 Comment   |  Flag   |  Jan 05, 2012 from Boston, MA
Julian Brett Morris

http://therosenbaumlawfirm.com/blog/ is a GREAT resources regarding 401k plans.

Flag |  Jan 05, 2012 near Boston, MA

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3 votes

Just to follow-up on a few posts I saw here. If you are the CFO, it would be very hard for you to claim no fiduciary responsibility. As mentioned, you could hire a 3(38) Investment Manager to alleviate much of your Investment Fiduciary responsibilities. If you elect to bring on a 3(38) ERISA Fiduciary, then you still have the responsibility to vet the 3(38) provider. • Make sure they actually acknowledge and accept the 3(38) status. • Check to make sure they have insurance that includes ERISA Fiduciary acts. • Make sure they have a Fidelity Bond for your plan. • Keep reviewed copies of their Form ADV. • Keep copies of any designations or background that is relevant to their 3(38) services. • Show record of price negotiation and comparison. • Review their systems and any outcomes they can provide proof of. • Makes sure they have no conflicts-of-interest. ERISA Fiduciaries aren't allowed to have any.

There are many more issues you should consider in hiring a 3(38). These are just a few.

Comment   |  Flag   |  Jul 09, 2012 from Austin, TX

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3 votes

Hi again: Thought you would find the following helpful as a way to prepare for the upcoming changes:


Please call with any questions.


1 Comment   |  Flag   |  Jul 11, 2012 from Port Washington, NY

The 'broad brush' answer is, 'If you have the ability to change anything on the plan", your probably a Fiduciary.

Flag |  Jul 11, 2012 near Houston, TX

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3 votes

You are in all likelihood a fiduciary. The term is quite often misunderstood as to what constitute a fiduciary. Generally if you are the CFO it is a treacherous path that you tread. Most certainly the trustee of the plan (usually the company owner) is held liable however whomever he depends upon for advice from person who is not a financial adviser, you become caught up in the DOL/IRS web of intrigue and let's see who we can blame for this issue of non-compliance. You can dodge this minefield by hiring a third party fiduciary (hopefully a good one) which will recommend investment choices, monitor those choices, review fees and expenses and have the deep pockets if they are wrong.

Comment   |  Flag   |  Jan 09, 2013 from San Antonio, TX

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2 votes

You are a fiduciary! Period, end of story. You can, however, delegate and mitigate the responsibility by hiring other professional fiduciary advisors.

1 Comment   |  Flag   |  Jan 12, 2012 from Arvada, CO
Evan M. Levine, ChFC

.....Particularly those that acknowledge status under erisa section 3(38)

Flag |  Jan 13, 2012 near Port Washington, NY

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1 vote

Plan sponsors are fiduciaries. As CFO, it's probably a part of your job description to be in charge of the plan. If you check the Department of Labor's Form 5500, it probably lists your name (or your predecessor in the position).

You can help reduce your liability by having in place a process for reviewing investment choices, documenting this extensively and implementing whatever safe harbor options you have available. One such option is to offer financial education to plan participants using various delivery methods - online and in person for example.

To mitigate the investment advice issue, you can also consider bringing in some other service provider to provide personalized advice for plan participants which may help get your HR staff out of the loop of those types of questions.

Comment   |  Flag   |  May 17, 2012 from Amesbury, MA

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