Sponsors of 401(k) and 403(b) retirement plans commonly rely on professional investment advisors to help them select and monitor investment funds offered under the plans. Sometimes those advisors are affiliated with the fund companies, but other times they are independent of them. Institutional trustees (such as banks), recordkeepers, and registered investment advisors (“RIAs”) frequently provide such services.
Whether those service providers are ERISA fiduciaries, however, is not always clear. ERISA’s definition of a fiduciary includes individuals and entities who provide investment advice for a fee. Regulations interpreting that term make it clear that a fiduciary relationship may exist even if the advisor is not given discretionary authority over plan assets. It is sufficient if (1) the service provider renders advice to the plan regarding the value and purchase of securities on a regular basis, (2) the advice is tailored specifically to the plan’s particular needs, and (3) the advice serves as a primary basis for the plan’s investment decisions. The advice need not be given pursuant to a written agreement, nor must it be the primary basis for the plan’s decisions; it need only be a primary factor.
Although many service providers take great pains to argue that they provide only generalized “information” to plans, rather than investment “advice,” and therefore are not ERISA fiduciaries, some are more willing to acknowledge their fiduciary status. One might question whether “information” provided by a party that actively avoids responsibility for it is as valuable as “advice” offered by one that acknowledges its special relationship to the plan. Regardless of the parties’ intent, however, the nature of the services provided and the manner in which plans use those services often will create a fiduciary relationship under ERISA.