The drafters of ERISA in the 1970s, “never contemplated ERISA being used as it is today,” Matthew Hutcheson noted at the Independent Fiduciary Symposium, as he introduced Jeff Mamorsky, chairman of the Global Benefits and Compensation Group at Manhattan-based law firm Greenberg Traurig. Mamorsky is one of the original drafters of ERISA legislation and a leading expert on ERISA law. Instead, Hutcheson added, they had “anticipated independent fiduciaries would run the plans.”
Speaking at the Symposium in New York on Wednesday, May 26, Mamorsky asserted that, “the independent fiduciary is the most important position in the ERISA world today.” Sponsors don’t want to have fiduciary responsibility for their ERISA plans. Most don’t have the time or skills needed to fulfill this responsibility, according to Mamorsky. And many don’t even realize that they have a fiduciary obligation to participants; that leaves them open to lawsuits by participants or missing compliance with IRS or ERISA rules that could disqualify a plan–and result in hefty monetary sanctions.
When sponsors understand that they can outsource the fiduciary responsibility to an expert, it would seem to be an easy choice for them to make. Mamorsky says this area of expertise is ready to “explode,” especially with the changes pending in Department of Labor legislation that is expected to require that plans reveal all fees or costs to participants.
Far from a typical plan in which, say, 401(k) participants must pick their own portfolios even if they totally lack investing expertise, the goals for plans run by an independent fiduciaries include better run plans that stay qualified, with a lower cost to participants, professionally managed portfolios–not target date funds–but portfolios; and the offloading of the fiduciary responsibilities from the sponsor. The individuals don’t pick the investments for their portfolio–investment fiduciaries do.