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Fiduciary Liability as a TPA


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Situation is in order for me as a TPA to be able to perform certain tasks on one of the mutual fund websites for my clients which are clearly not fiduciary, the authorization I need to perform those tasks, will also give me the ability to allow a distribution. So, if a participant submitts a request online for a distribution and it needs authorization, my electronic sign on into the plan could be used to authorize the distribution if I so chose to do that. Although I would never do this, we always have Trustees sign on distributions, the option would be there. So, although we would never exercise this option, will that make us a fidicuary, and if so, what are my options. Can we get a letter from the Trustees stating that we are only allowed to perform certain tasks with the authorization power we need?

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As you already suspect, if the investment fund's computer facility is an all-or-nothing for which the fund's customer isn't permitted to specify exactly which tasks are or are not authorized, such an arrangement might leave you vulnerable to an argument about the effect of your powers. While you might argue that you and the plan had agreed to limits on your authority, others might argue that, once an authorization of you to use the computer facility is in effect, the investment fund had no duty or obligation to restrain you from exceeding the limits of your agreement with the plan.

You might weigh the benefits and burdens of a computer facility after both you and your lawyer have read its documents and evaluated its risks.

Many recordkeeper businesses price the services with some assumptions about the possibility that it might become necessary to defend against assertions that the recordkeeper's scope or duty was greater than its service contract. Some consider a risk of an assertion that the recordkeeper was a fiduciary as a normal or intrinsic risk of the business.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania



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