happy holidays

December 2015

Inside this issue:


A plan may have one or more fiduciaries. Each of the fiduciaries may have different responsibilities and many individuals/committees serve in multiple fiduciary roles. Here is a simplified list, along with brief definitions, of each category of fiduciary:

  • Named Fiduciary. This party should be named in the plan document and is considered the plan’s primary decision maker. This fiduciary may be either an employee of the sponsor, or an independent party, that, absent delegation otherwise, has the duty to control, manage, and administer the plan. Every plan must have a named fiduciary. It is not uncommon for the named fiduciary to also serve as plan administrator and trustee for a plan.
  • Plan Administrator. Not to be confused with pension administrator or a hired third party administrator (TPA), this fiduciary is responsible for the plan’s government filings, making required disclosures to participants, hiring service providers, and fulfilling other responsibilities set forth in the plan document.
  • Trustee. The person(s) recognized as having exclusive authority and discretion over the management and control of plan assets.
  • Investment Manager. A fiduciary with full discretionary powers for selecting, monitoring and replacing plan investment options, as defined by ERISA section 3(38).
  • Investment Advisor. A limited scope ERISA 3(21) advisor who does not have explicit discretionary control over plan assets, but may exercise a certain level of influence over the operation of the plan by way of providing investment advice/monitoring services. This fiduciary must still meet the fiduciary standards set forth in ERISA.
  • Other Fiduciaries. Other individuals, including members of various plan-related committees appointed by the named fiduciary, as well as others whose actions may dictate fiduciary status, may fall within the definitions of fiduciary under ERISA. Thus it is important to not only monitor those individuals who are explicitly named as fiduciaries in writing, but also those that have a high likelihood of undertaking fiduciary actions on behalf of the plan.

In all cases, the plan sponsor retains the authority to remove and replace any fiduciary, even if he/she has delegated day-to-day responsibilities to others. As a result, the sponsor/named fiduciary retains the responsibility to monitor any persons to which he/she has delegated responsibilities on an ongoing basis.


Specialty asset classes are those which do not fall into the “core” group of asset classes. Core asset classes include: U.S. domestic equities, international, and fixed income. For the purpose of this commentary, specialty asset classes consist of the following: technology, health care, emerging markets, and real estate.

While specialty asset classes can provide value when constructing a fully diversified portfolio, their inclusion in a retirement plan as a stand-alone option is potentially problematic. The concern revolves around expanded fiduciary liability exposure created by potential unsophisticated participants utilizing specialty asset class investments inappropriately.

The classic scenario is where a participant nearing retirement learns of attractive returns a co-worker has obtained by investing in a specialty asset class (i.e. Technology in the late 1990’s). Subsequently, the participant decides to invest a significant portion of his/her account balance in the same specialty fund in an attempt to achieve similar returns. Due to volatility inherent in this asset class, the investment experiences a significant loss over the next year and the participant becomes disgruntled and seeks reparation from the plan. The participant may contend that he/she did not receive appropriate education regarding the risks inherent in the investment. And fiduciaries may be liable for allowing an imprudent investment to be offered within their plan.

Note that many core asset class funds do have some exposure to specialty asset classes. International funds may have some emerging markets exposure. Core bond funds may have high yield exposure. Domestic equities may have health care, technology and real estate exposure. This may cause some participants who invest further in specific specialty funds to be unknowingly and inappropriately overweighed in specialty asset classes.

Other concerning issues also exist. In the event of underperformance of a fund (or provider), where fund removal and mapping becomes appropriate, some providers do not have multiple options within a specific specialty class. Where then should these assets be mapped to? There is no clear “fiduciary safe” answer. In addition, many specialty asset classes do not yet have substantial benchmarks to assist in monitoring, a fiduciary responsibility.

The inclusion of specialty asset classes in a retirement plan menu should be considered carefully and subsequently the decision for or against should be well documented in the retirement committee’s meeting minutes. Your plan consultant is happy to help you with this process.


On behalf of Montgomery Retirement Plan Advisors, I would like to extend to you the greetings of this special season. To our clients, I would like to express our gratitude to you for the privilege of serving as your retirement plan consulting team. To our partners and peers within the retirement plan industry, I sincerely appreciate your support and the confidence you have shown in our firm.

- Mike Montgomery & and your MRPA Team

No strategy assures a profit or protect against loss.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.

For Plan Sponsor use only – Not for use with Participants or the General Public.This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations. 

Montgomery Retirement Plan Advisors does not warrant and is not responsible for errors or omissions in the content of this newsletter.

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