Employer / Trustee roles

[Guest brian_j]

Does ERISA or the IRS prevent the sponsor of a leveraged ESOP from also assuming the role of trustee? This allows the sponsor/employer somewhat more control of the trust accounting, recordkeeping, etc. and save on costs. The company would continue to have an annual appraisal conducted by and independent valuation firm.

[Guest stryan]

Let's hope there isn't any prohibition on this. I think all the leveraged ESOPs over the years I have worked on have been self-trusteed.

[QDROphile]

Keep in mind that most corporations cannot be trustees. Also keep in mind that whoever the fiduciaries may be, they have to keep their corporate and fiduciary roles straight and may have very serious conflicts in various circumstances. If the labels overlap, the concepts may be had to keep separate. Finally, it is never a good idea to name the sponsor as the plan administrator or other fiduciary.

[Kirk Maldonado]

I agree with QDROPhile, except that "Plan Administrator" is defined in ERISA as basically the person responsible for satisfying the reporting and disclosure obligations. Because of the significant penalties involved in failing to satisfy the reporting and disclosure rules, I think that those should be borne by the corporation.

[QDROphile]

Mr. Maldonado:

I am curious about why you generally agree with me that the corporate sponsor should not be named as a fiduciary (which would include the plan administrator), but disagree when it comes to the plan administrator of ESOPs. Your posts in several threads have been perfectly consistent. I must be missing some nuance.

[Kirk Maldonado]

"Plan Administrator" (as that term is used in ERISA) does not mean the party that administers the plan. That is the "Named Fiduciary." The Plan Administrator is the party that is responsible for satisfyihg the reporting and disclosure obligations.

In my documents, I designate the corporation as the "Plan Administrator," but the committee is the Named Fiduciary.

[QDROphile]

Do you think your "plan administrator" is not a fiduciary?

[Kirk Maldonado]

I don't think that filing the Form 5500, etc. necessarily involves a fiduciary function.