DEPARTMENT OF LABOR LEGAL "PENSION TRUSTEE" FIDUCIARY DEFINITIONS
What is the significance of being a fiduciary?
Fiduciaries have important responsibilities and are subject to standards of conduct because
they act on behalf of participants in a retirement plan and their beneficiaries. These
Acting solely in the interest of plan participants and their beneficiaries and with the
exclusive purpose of providing benefits to them;
Carrying out their duties prudently;
Following the plan documents (unless inconsistent with ERISA);
Diversifying plan investments; and
Paying only reasonable plan expenses.
The duty to act prudently is one of a fiduciary’s central responsibilities under ERISA. It requires
expertise in a variety of areas, such as investments. Lacking that expertise, a fiduciary will
want to hire someone with that professional knowledge to carry out the investment and
other functions. Prudence focuses on the process for making fiduciary decisions. Therefore,
it is wise to document decisions and the basis for those decisions. For instance, in hiring any
plan service provider, a fiduciary may want to survey a number of potential providers, asking
for the same information and providing the same requirements. By doing so, a fiduciary can
document the process and make a meaningful comparison and selection.
Following the terms of the plan document is also an important responsibility. The document
serves as the foundation for plan operations. Employers will want to be familiar with their plan
document, especially when it is drawn up by a third-party service provider, and periodically
review the document to make sure it remains current. For example, if a plan official named in
the document changes, the plan document must be updated to reflect that change.
With these fiduciary responsibilities, there is also potential liability. Fiduciaries who do not
follow the basic standards of conduct may be personally liable to restore any losses to the
plan, or to restore any profits made through improper use of the plan’s assets resulting from
However, fiduciaries can limit their liability in certain situations. One way fiduciaries can
demonstrate that they have carried out their responsibilities properly is by documenting the
processes used to carry out their fiduciary responsibilities.
There are other ways to reduce possible liability. Some plans, such as most 401(k) and profit
sharing plans, can be set up to give the participants control over the investments in their
accounts and limit a fiduciary’s liability for the investment decisions made by participants. For
participants to have control, they must be given the opportunity to choose from a broad range
of investment alternatives. Under Labor Department regulations, there must be at least three
different investment options so that employees can diversify investments within an investment
category, such as through a mutual fund, and diversify among the investment alternatives
offered. In addition, participants must be given sufficient information to make informed
decisions about the options offered under the plan. Participants also must be allowed to give
investment instructions at least once a quarter, and perhaps more often if the investment
option is volatile.
Plans that automatically enroll employees can be set up to limit a fiduciary’s liability for any
plan losses that are a result of automatically investing participant contributions in certain
default investments. There are four types of investment alternatives for default investments
as described in Labor Department regulations and an initial notice and annual notice must
be provided to participants. Also, participants must have the opportunity to direct their
investments to a broad range of other options, and be provided materials on these options to
help them do so. (See Resources for further information.)
However, while a fiduciary may have relief from liability for the specific investment allocations
made by participants or automatic investments, the fiduciary retains the responsibility for
selecting and monitoring the investment alternatives that are made available under the plan.
A fiduciary can also hire a service provider or providers to handle fiduciary functions, setting
up the agreement so that the person or entity then assumes liability for those functions
selected. If an employer appoints an investment manager that is a bank, insurance company,
or registered investment adviser, the employer is responsible for the selection of the
manager, but is not liable for the individual investment decisions of that manager. However,
an employer is required to monitor the manager periodically to assure that it is handling the
plan’s investments prudently and in accordance with the appointment.
TITLE V-SAFEGUARDS FOR LABOR ORGANIZATIONS
Fiduciary Responsibility of Officers of Labor Organizations
[click here for AUD summary]
(29 U.S.C. 501)
SEC. 501. (a) The officers, agents, shop stewards, and other representatives of a labor organization occupy positions of trust in relation to such organization and its members as a group. It is, therefore, the duty of each such person, taking into account the special problems and functions of a labor organization, to hold its money and property solely for the benefit of the organization and its members and to manage, invest, and expend the same in accordance with its constitution and bylaws and any resolutions of the governing bodies adopted thereunder, to refrain from dealing with such organization as an adverse party or in behalf of an adverse party in any matter connected with his duties and from holding or acquiring any pecuniary or personal interest which conflicts with the interests of such organization, and to account to the organization for any profit received by him in whatever capacity in connection with transactions conducted by him or under his direction on behalf of the organization. A general exculpatory provision in the constitution and bylaws of such a labor organization or a general exculpatory resolution of a governing body purporting to relieve any such person of liability for breach of the duties declared by this section shall be void as against public policy.
(b) When any officer, agent, shop steward, or representative of any labor organization is alleged to have violated the duties declared in subsection (a) and the labor organization or its governing board or officers refuse or fail to sue or recover damages or secure an accounting or other appropriate relief within a reasonable time after being requested to do so by any member of the labor organization, such member may sue such officer, agent, shop steward, or representative in any district court of the United States or in any State court of competent jurisdiction to recover damages or secure an accounting or other appropriate relief for the benefit of the labor organization. No such proceeding shall be brought except upon leave of the court obtained upon verified application and for good cause shown which application may be made ex parte. The trial judge may allot a reasonable part of the recovery in any action under this subsection to pay the fees of counsel prosecuting the suit at the instance of the member of the labor organization and to compensate such member for any expenses necessarily paid or incurred by him in connection with the litigation.
(c) Any person who embezzles, steals, or unlawfully and willfully abstracts or converts to his own use, or the use of another, any of the moneys, funds, securities, property, or other assets of a labor organization of which he is an officer, or by which he is employed, directly or indirectly, shall be fined not more than $10,000 or imprisoned for not more than five years, or both.
On Feb 2, 2012, at 1:05 PM, Kent McCord wrote:
AFTRA health and pension plan trustees take union to task
February 2, 2012 | 11:47 am
In what could be a move by employers to throw some cold water on the planned merger of Hollywood's two actors unions, trustees for the health and pension funds of the American Federation of Television and Radio Artists have issued a statement challenging some legal opinions cited by the unions.
The trustees of AFTRA's health and retirement plans, which include representatives from labor and management, on Thursday took issue with a "feasibility review" document the unions posted on their websites this week. Those cited the opinion of various lawyers -- including Jani Rachelson, co-counsel of the AFTRA Health and Retirement Funds -- stating "there are no legal impediments to merging the plans." <6a00d8341c630a53ef0163009af4a2970d-300wi.gif>
The feasibility review was part of an overall merger package the boards of the two unions recently approved in a bid to gain more leverage in negotiations with studios, which in the past have successfully exploited divisions between the two groups to gain the upper hand in contract talks. Members of each union will vote on the merger in the coming weeks.
On Thursday, the board of trustees for the AFTRA health and pension funds said the feasibility review did not represent the opinion of the board.
"The Board of Trustees did not request or authorize this opinion of Fund co-counsel and had no prior knowledge of this letter before reading the posting on the websites,'' the trustees said in a statement. "Although there is no doubt that planned mergers are legally permissible in appropriate circumstances, the merger of pension and health funds as large and divergent as the SAG and AFTRA plans raise complex and unique financial, legal and benefit issues which can only be addressed through a comprehensive analysis performed by the funds."
Details on how the unions' respective health and pension plans will be combined will be addressed only after members approve a merger in upcoming referendum.
A spokeswoman for AFTRA declined to comment on the matter.
-- Richard Verrier