Conflict of Interest Question

[Fielding Mellish]

Plan X is a defined benefit plan. A new trustee is being appointed due to the death of a trustee. The new trustee is retired and is receiving a pension benefit from the plan itself.

Is this a prohibited conflict of interest?

My gut says it is not. So long as the trustee can appropriately put on his "trustee hat" and leave his "participant hat" at the door, I would think his decisions would be ok.

[Bill Ecklund]

Plan X is a defined benefit plan. A new trustee is being appointed due to the death of a trustee. The new trustee is retired and is receiving a pension benefit from the plan itself.

Is this a prohibited conflict of interest?

My gut says it is not. So long as the trustee can appropriately put on his "trustee hat" and leave his "participant hat" at the door, I would think his decisions would be ok.

As long as the trust agreement does not prohibit the appointment as a trustee, there is no problem. ERISA § 406 prevents a trustee from receiving any money from the plan. However, ERISA § 408© states that nothing in § 406 shall be construed to prohibit a trustee from –

• receiving a benefit from the plan as a participant or beneficiary,

• receiving any reasonable compensation for services rendered, or

• for the reimbursement of expenses properly and actually incurred in the performance of his duties with the plan; except that no person so serving who already receives full-time pay from an employer or an association of employers, whose employees are participants in the plan, or from an employee organization whose members are participants in such plan, shall receive compensation from such plan, except for reimbursement of expenses properly and actually incurred.

• serving as a trustee despite the fact that they are an officer, employee, agent or other representative of a party in interest.