IRA Rollover

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Fiduciary Definition of ERISA

What is the Fiduciary definition of ERISA?

According to ERISA, any person or organization which has discretionary authority, control, or renders investment advice for a fee with regard to either the investment of employee benefit plan assets or the administration of the plan, is a fiduciary with respect to that plan.

Under ERISA, a fiduciary (both the financial advisor and the financial firm he/she belongs) will be personally liable for all losses suffered by a plan as a result of the fiduciary’s breach of duty.

Other penalties which may be suffered under ERISA include the ability of the U.S. Department of Labor to seek a court injunction barring a violator from serving as a fiduciary with respect to any employee benefit plan.

ERISA Suitability of Investments

Generally, suitability of investments of an ERISA plan is determined by the fiduciary duty and standards of conduct. Even if a financial institution involved in a company’s ERISA plan is not a fiduciary with respect to a plan, that financial company could nevertheless be held liable under securities law for recommending unsuitable investments to an employee benefit plan, Keogh, 401k or IRA.

Investments that are permitted in ERISA covered retirement accounts are not necessarily suitable for use in such retirement accounts. Prior to entering into any investment, it is absolutely necessary that you are aware of and understand the risks associated with each investment.