You may be a fiduciary and not know it

Practice Pointers. By Amy S. Born, AMNews contributor. May 19, 2003.

PRACTICE POINTERS

Answers to questions about the business side of your practice

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Question My practice has grown significantly over the past several years. As a benefit to my employees who have contributed to this growth, I recently established a defined-contribution 401(k) plan. As the employer, I act as the retirement plan's trustee. I understand that as the employer, I am considered a "fiduciary." What does this mean to me personally?

Answer Thanks to incidents like Enron, of employees losing the whole of their 401(k) value because it was heavily invested in company stock that ended up tanking, companies are becoming more and more aware of their role as fiduciaries as it relates to their company retirement plans. This is especially important in today's environment, as fiduciaries may be held personally liable for a breach of their fiduciary responsibility.

According to the Foundation for Fiduciary Studies, it is likely that complaints and lawsuits alleging fiduciary misconduct will increase.

Although fiduciary/employers are not responsible for the individual investment selection choices made by the participant/employee, they are responsible for the selection and monitoring of the investment options within the defined contribution plan.

To assist in this area, the foundation authored a handbook, Prudent Investment Practices, which is intended to be a reference guide to assist knowledgeable investment decision-makers in the management of their retirement plan assets.