The Employee Benefits Security Administration has issued a bulletin that talks about the fiduciary responsibilities of certain companies that help with retirement plan administration.[@@]
The companies, “directed trustees,” are banks, trust companies or other companies that handle tasks such as buying stock for the employer that sponsors a plan and other plan fiduciaries.
Directed trustees have only a limited role in protecting plan participants against bad fiduciary decisions, according to Robert Doyle, EBSA’s director of regulations and interpretations.
When, for example, the directed trustee has the same information that every other investor has about a publicly traded stock, the trustee’s obligation to question transactions based on prudence grounds is limited, Doyle writes in EBSA Field Assistance Bulletin Number 2004-03.
But a directed trustee might have an obligation to check with the fiduciaries if, for example, the fiduciaries had asked the directed trustee to buy stock in a company that had just filed for bankruptcy, Doyle writes in the bulletin.
A directed trustee might have an obligation to notify the U.S. Department of Labor if it knew that a plan fiduciary were violating the Employee Retirement Income Security Act of 1974, and it would have an obligation to speak up if it had non-public information that was relevant to a fiduciary’s decisions about a plan, Doyle writes.
In addition, “a directed trustee must follow processes that are designed to avoid prohibited transactions,” Doyle writes. “A directed trustee could satisfy its obligation by obtaining appropriate written representations from the directing fiduciary that the plan maintains and follows procedures for identifying prohibited transactions and, if prohibited, identifying the individual or class exemption applicable to the transaction.”
A directed trustee can rely on the fiduciary’s representations unless the directed trustee knows that those representations are false, Doyle writes.
The EBSA bulletin is on the Web at http://www.dol.gov/ebsa/pdf/fab-2004-3.pdf