Naming Individual as "Directed Trustee"

[austin3515]

Can someone please explain the benefit of adding someone who is clearly a fiduciary as a "Directed Trustee."  Our document allows an individual to be named as a directed trustee.  Shoudl we always be using it or is it a moot point for someone like a business owner or a non-owner CEO, etc. when they are clearly a fiduciary anyway?

[Belgarath]

While I'll leave this to the fiduciary experts, I've always assumed it was to limit the liability (and authority) of one or more trustees. I've seen situations where a bank is a directed trustee - in order to act as trustee, they require that the document name them as a "directed trustee."

[CuseFan]

As directed trustee the person is taking direction from the Plan Administrator and/or possibly (for investment direction) the participants. That could limit this person's liability to the execution of those instructions. However, if it's the business owner, who is also the PA, it doesn't really matter, but if it's a non-owner officer, maybe CFO or CHRO, who is not exercising any discretionary authority then naming as a directed trustee has utility.

[austin3515]

Well that's just it, the guy who has to be named at the trustee is the person with the most authority in the room almost all the time (at least in my "small market" plans). 

So for example, who signs off on Fund Changes or who hires the advisors, etc.  IF it's the same person then it sounds like we all agree there is no purpose to it?

[austin3515]

Also if you have a directed trustee, then wouldn;t it stand to reason that it better be darn well documented who exactly is responsible for all of that stuff?  So if the guy named as trustee is a top executive, and his excuse, well it wasn;t my responsibility, I'm just a lowly directed trustee, to me that would be used as evidence against you merely for the fact that is so disingenuous.

[Bird]

I agree there is generally no point in a small market plan.  Trying to avoid or take on liability just sends you in circles.

I did (do) have a plan where the owners did bad stuff and are prohibited from being trustees so there is a directed trustee.

[Luke Bailey]

austin3515 I think you are correct. Typically I see "directed trustee" used only where there will be a financial institution that is trustee and that won't even select the funds, e.g. a committee selects. If you have a small company and the owner will be trustee and select the fund menu, but the employees will choose among the funds for their own account, the trust agreement should just say that and the plan and SPD should have the obligatory 404(c) language out of the 404(c) regs to make it clear that the trustee is not responsible for the consequences of the employees choices among the funds (i.e., the trustee may be responsible for the quality, cost-effectiveness, and diversity of the funds, but not for the employees' asset allocation decisions among those funds).