Fiduciary Responsibility And The Law

A trustee for a company's individual employee benefit funds bears an enormous financial responsibility to those who have selected that benefit and who rely upon it to be delivered to them properly. They have not made the executive decisions to establish the plan itself, yet in administering the plan, there are many opportunities to engage in transactions that are contradictory to the purpose of the benefit plan or simply self-serving.

Pitta LLP assists employers and plan sponsors in New York and New Jersey in understanding this crucial area of employee law. We have handled cases related to the Employee Retirement and Income Security Act (ERISA) for decades.

Who Is Considered A Fiduciary For An Employee Benefit Plan?

Fiduciary responsibility for an employee benefit plan hinges more on a person's discretion to make decisions related to the plan or their control of the plan's assets, and less on their formal job title. A trustee of the plan is often considered a fiduciary, as are investment advisors and the plan's advisory committee. Lawyers and accountants are not ordinarily considered fiduciaries when acting in a professional capacity related to the plan.

What Transactions Are Prohibited By Fiduciaries?

Many of the transactions prohibited by fiduciaries focus on the avoidance of conflicts of interest or self-dealing. These prohibitions include:

  • Sale, exchange or lease of any property between a fiduciary and a "party of interest"
  • Lending money or extending credit to a party of interest using plan assets
  • Failing to diversify plan assets
  • Use the plan assets in their own interest or to benefit their individual account

Are There Exemptions To Prohibited Transactions?

ERISA allows some exemptions to the previously mentioned prohibited transactions. Some of the most common "statutory exemptions" include:

  • Allowing participant loans from the plan to actively contributing employees
  • Permitting the contracting of record-keepers and others necessary for the operation of the plan
  • Providing plan benefits to fiduciaries who are also participants

Our firm is always happy to help you address complicated fiduciary questions and advise you on how to rectify any situation in which a prohibited transaction has occurred.

Administer Your Benefit Plans With Confidence

Our firm has been representing clients with employee benefit issues for more than 40 years. Our attorneys offer trustworthy guidance on how to execute the obligations of trusts faithfully. We have three offices in New York state for your convenience. To make an appointment with us, call 212-652-3890 or email the firm.