On May 7, 2008, the American Bar Association’s Joint Committee on Employee Benefits (JCEB) met with representatives of the United Stated Department of Labor (“DOL”) for a question and answer session. Although the answers provided by the DOL representatives are informal and not binding on the DOL, the answers often provide a glimpse into the DOL’s thinking on a particular issue.
One question that was posed and answered by the DOL representatives provides a timely reinforcement of some of the fiduciary liability issues discussed during our Practice Group’s Seminar and the recent webinar.
Scenario: A corporation and its directors are aware of the view that a person who has discretionary power to appoint a fiduciary is, to the extent of that power, a fiduciary with some responsibility to monitor his or her appointee’s performance to the extent needed to evaluate whether to remove the appointee. In establishing a new pension plan, the corporation, by its governing board, adopts a plan document that specifies that a particular named person is the plan administrator, trustee, and named fiduciary. Although the plan document includes an amendment provision, the provision states that any amendment to the plan that purports to change or remove the plan administrator, trustee, and named fiduciary is void. The plan document provides that no person other than a court can remove the plan administrator, trustee, and named fiduciary.
Question: Is it clear that the corporation and its directors need not monitor the fiduciary's performance?
DOL Answer: The selection of plan fiduciaries, such as a plan’s administrator, trustee, or named fiduciary, is a fiduciary function and those who appoint fiduciaries remain responsible for monitoring those whom they have selected, regardless of any plan language to the contrary. Any plan amendment that would purport to eliminate a plan fiduciary’s responsibility to monitor, and, if need be, change or remove the plan administrator, trustee, and named fiduciary would be contrary to ERISA.