Wednesday, February 1, 2012

Can I really outsource my fiduciary responsibility?

Investing is complicated enough, and when you throw a bunch of Department of Labor regulations into the mix, things get even more complicated.

So as this article in Investment News points out, many are reacting to this by trying to outsource some fiduciary functions:  "The solution involves outsourcing fiduciary functions, and several investment advisory firms — chief among them Morningstar Investment Management, Wilshire Associates Inc. and the advisory arm of Mesirow Financial Holdings Inc. — now are providing investment menu design, fund selection, market commentary and other services to small-plan sponsors and the broker-dealers and insurers who sell such plans."  Who can blame them?

But wait, look a little further an you'll see this little tidbit: "Acting under Section 3(21) of the Employee Retirement Income Security Act of 1974, an asset manager becomes a co-fiduciary and shares fiduciary responsibility..."

So, as Ari Rosenbaum also points out, plan sponsors are still on the hook.  There is just no easy replacement for understanding the fund lineup being offered and making sure the plan participants have the information they need to make good decisions.


  1. Plan sponsors of employee benefit plans have certain fiduciary responsibilities, including the overall administration of the underlying sponsored plans. Plan sponsors typically engage various TPAs for their plan such as a bank trust department, data processing bureaus, insurance companies, or other benefits administrators to assist in the plan administration. They outsource investment processing, participant recordkeeping, benefit payments and/or claims processing, usually to reduce plan costs and increase the efficiencies in administrating their plan. It is important to note that the hiring of a service provider to perform any or all of the duties mentioned above.For further information on monitoring TPAs and related services regarding employee benefit plan administration,go with Ayers.

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