ERISA Fiduciary Guidebook

Interplay of Bankruptcy Laws and ERISA Fiduciary Law

The Bankruptcy Case Blog has an interesting post here about how federal courts are split over the issue of whether fiduciary status under ERISA carries over into the federal bankruptcy laws.  Excerpt: 

The federal courts are currently split on the issue of whether the functional definition of "fiduciary" used in ERISA constitutes a “fiduciary” for purposes of the section 523(a)(4) discharge exception when the ERISA fiduciary fails to comply with ERISA obligations.  At stake in two recent cases was the status of a corporate officer's liability where employee contributions withheld by the corporate employer were not remitted to the pension and welfare funds.  In In re Mayo, the Vermont Bankruptcy Court sided with those courts finding that being an ERISA fiduciary makes a debtor a fiduciary under the Code.  As a result, the owner of a steel erection company, when declaring personal bankruptcy, was barred from discharging the $181,000 debt his company owed under a collective bargaining agreement to the employee benefit funds.  Meanwhile, the Sixth Circuit in In re Bucci went the other way in permitting a company president to discharge his liability for the debt his company owed to a multiemployer pension fund, holding that his status as an ERISA fiduciary was not sufficient to trigger the bankruptcy discharge exception. . .

Although the Supreme Court has denied certiorari for Bucci, the issue continues to divide the courts as the Mayo decision demonstrates.  It will be interesting to see if the current economic climate influences the courts to take a more lenient or strict view of what constitutes a fiduciary relationship in order to safeguard employee monies from employer misuse.

IRS's Online Internal Controls Questionnaire - A Helpful Tool for Monitoring Fiduciaries

The DOL holds that fiduciaries have a duty under ERISA to monitor their service providers who are involved in plan administration.  The IRS has recently posted on their website an Internal Controls Questionnaire which fiduciaries might find useful as a tool in determining whether their service providers have practices and procedures in place which will ensure compliance with plan terms and the statutory provisions of ERISA.  Read more about the Questionnaire in this post at Benefitsblog. 

More on the fiduciary duty to monitor service providers here and here.

DOL Comments on Fiduciary Status

Fiduciary duties under ERISA are often referred to in caselaw as "the highest known to law” (Donovan v. Bierwirth, 680 F.2d 263, 272 (2d Cir. 1982)).  And yet, many individuals are not aware that they are engaged in activities which would render them to be fiduciaries under ERISA. 

Under ERISA, individuals can become fiduciaries in three ways:  (1) By being named in plan documents (2) by being designated according to procedures in plan documents, or (2) by being engaged in activities for a plan which are fiduciary in nature (referred to as "Functional Fiducaries").  It is this Functional Fiduciary status which can often take people by surprise. 

The DOL has a couple of Interpretative Bulletins online which provide some guidance for determining who is a fiduciary under ERISA:

29 CFR 2509.75-5 - Questions and answers relating to fiduciary responsibility

29 CFR 2509.75-8 - Questions and answers relating to fiduciary responsibility under the Employee Retirement Income Security Act of 1974

In addition, the DOL last week in its webcast made these informal comments about the subject of who is a fiduciary under ERISA:

(1)  The DOL noted that services providers may become fiduciaries if they provide individualized advice (even though their provider contracts might provide that they are not fiduciaries).  The examples given by the DOL were accountants who provide investment advice to Trustees on a regular basis or recordkeepers who make final determinations regarding eligibility for benefits. 

(2)  The DOL also noted that giving investment advice is a fiduciary act, while providing investment education is not.  However, monitoring those who provide investment education to participants is a fiduciary act, according to the DOL.

Delay in Effective Date for Investment Advice Regulations

On January 21, 2009, the Department of Labor published final rules on the provision of investment advice to participants and beneficiaries of participant-directed individual account plans and to beneficiaries of IRAs. By memorandum dated January 20, 2009, the new administration directed Agency Heads to consider extending for 60 days the effective date of regulations that had been published in the Federal Register but not yet taken effect.

On March 20, 2009, the Department delayed the proposed effective date of the above regulations by 60 days. After receiving further comments on the regulations (which you can access here), the DOL issued this Notice today here indicating that it will further delay the effective date until November 18, 2009 (a delay of 180 days). The DOL provides the reason for the delay as follows:

The Department believes that the complexity and significance of the issues involved justify delaying the effective and applicability dates of the final rule for an additional 180 days in order to afford the Department time for further review.

Employee Benefits Research Tips and Techniques

I am posting my outline for a presentation given to the Louisville Employee Benefits Council on March 10th of this year.  Download Employee Benefits Research Tips and Techniques

DOL Posts ERISA Fiduciary Webcast

The DOL has posted on their website archives of the Webcasts they presented last week:

Getting It Right - Know Your Fiduciary Responsibilities Webcast Series - Part I

Getting It Right - Know Your Fiduciary Responsibilities Webcast Series - Part II

The webcasts discuss:

• Understanding the plan and fiduciary responsibilities under the plan,
  
• Selecting and monitoring service providers,
  
• Making contributions on time,
  
• Avoiding prohibited transactions, and
  
• Making appropriate disclosures to plan participants and filing annual reports to the government on time.