Large Organiztion / Indiv Trustee vs Directed Corp.Trustee

[austin3515]

Is it good advice for the CEO (and perhaps the organization) to avoid naming the CEO as the Trustee? I am suggesting this to a client based on the logic that hey, if you're named, it's not even up for discussion. It is YOUR fault and yours alone.

On the other hand if there was a directed corporate trustee, now there will be inevitable finger-pointing and a burden of proof to try and figure out who was a fiduciary.

I know people are going to respond and say the "CEO will always be a fiduciary, have good intnernal policies" and blah blah blah. But that's not really what I'm wondering. What I'm wondering is, am I right that the benefits to the individual merely by not being named a trustee meaningful from a personal liability perspective. [again, not asking about fiduciary insurance, etc].

[QDROphile]

While you are correct that it relieves a fiduciary of some potential liability to appoint another fiduciary to be responsible for a function, the practical value of the appointment depends on the function. Pure custodial responsibility is not a liability-prone function, which is why being a directed trustee is nice work. The appointing fiduciary also must be prudent in choosing the appointed fiduciary and must monitor. We are not sure what monitoring means in many cases. The DOL will almost always charge the appointing fiduciary with failure to adequately monitor when the DOL charges a breach of fiduciary duty.

[JRN]

I think it's good advice to use the corporate trustee. The corporate trustee generally charges either -0- or something nominal, such as $500 per year. As a practical matter, the corporate trustee is 'directed', so this does not absolve the other plan "decision-makers" from fiduciary responsibility. But, it does -- in your case -- keep the CEO's name out of the Plan's SPD (in other words, the SPD will identify the Trustee as being the corporate trustee and not the individual CEO) -- and I've always thought there is practical value in that.