Trustee types and who signs

[TPApril]

When a plan designates someone else such as the custodian of the assets as a directed Trustee, would that entity be the one signing plan documents as Trustee, even though the Plan Sponsor/Administrator theoretically still also has the additional role of Plan Trustee? Or am I just too confused here?

[MoJo]

4 hours ago, TPApril said:

When a plan designates someone else such as the custodian of the assets as a directed Trustee, would that entity be the one signing plan documents as Trustee, even though the Plan Sponsor/Administrator theoretically still also has the additional role of Plan Trustee? Or am I just too confused here?

Custodians sign custody agreements.  Trustees sign trust agreements (and the trust agreement spells out the role of the trustee - even if it is "merely" a non-discretionary, directed trustee).  Neither signs anything else (and since our prototype no longer contains an embedded trust agreement, it is separate from all other plan documents).  That non-discretionary trust agreement also spells out the role of the other "fiduciary" responsible for the directions (and is signed by the plan sponsor as well).

[Roycal]

I'd suggest that although not necessarily confused, you may not be clear.  As MoJo points out, a the Trustee, whether directed or not, is the trustee.  The employer/plan administrator(/plan sponsor) is undoubtedly a fiduciary as plan administrator, but that does not make them a trustee.  If you've got a signature line for a "Trustee" signature, that would be the Trustee.  However, read the documents carefully (as you do first step in any case)--that's what they are for.  They may tell something more about signatories.  You could also ask the individual who drafted the document in question if you wish to go that far.

[QDROphile]

Neither plan sponsors nor employers are fiduciaries as such. Plan documents often make them into fiduciaries by giving them fiduciary functions, such as the power/responsibility to appoint a fiduciary (e.g. a trustee) or designating them as plan administrator. It is a common flaw in plan documents to automatically impose such fiduciary responsibility on plan sponsors,  or employers, without provision for, or consideration of, other options that could be preferable.

[MoJo]

On 7/30/2023 at 2:17 AM, QDROphile said:

Neither plan sponsors nor employers are fiduciaries as such. Plan documents often make them into fiduciaries by giving them fiduciary functions, such as the power/responsibility to appoint a fiduciary (e.g. a trustee) or designating them as plan administrator. It is a common flaw in plan documents to automatically impose such fiduciary responsibility on plan sponsors,  or employers, without provision for, or consideration of, other options that could be preferable.

Theoretically, I would agree - but practically, one who can appoint a fiduciary is a fiduciary by virtue of appointing fiduciaries being a fiduciary functions (say that three times real fast).  You point that out.  However, absent the plan sponsor appointing a fiduciary, how does a fiduciary get appointed?  You could appoint a fiduciary directly in the plan documents (and that *might* be a settlor act), but the plan sponsor (at least indirectly) has the power to "fire" the fiduciary by amending the document.  It become somewhat of a tautological conundrum.  The more you try not to be a fiduciary, the more you likely are becoming a fiduciary - because trying to insulate yourself from the hire/fire a fiduciary, the more you must have the power to hire/fire a fiduciary....

In court, I'd not be able to express the position that an employer isn't a fiduciary with a straight face.  The one exception would be where the employer screws up bad enough that the DOL forbids the plan sponsor from being a fiduciary and appoints an independent fiduciary (and yes, it has happened - I worked for a trust company that became that fiduciary when the DOL found the "plan owned" wine collection and oriental rugs in the homes of the company owning family).

It's not bad to be a fiduciary, it's just bad to be a bad fiduciary....

[QDROphile]

An example that brings this in from the theoretical to the practical: A plan document says that the adopting corporate employer is the plan administrator. Under corporate law, that means every member of the board of directors is an ERISA fiduciary, and if the board (or the plan document or ... ) does not formally delegate the fiduciary responsibility to someone else who truly understands and pays attention to the function of plan administrator, it is likely that the board members will not appreciate what they need to be doing, at least by way of oversight, which automatically makes them the "bad fiduciaries" noted above, while some other person actually takes care of plan administrator business. The DOL, and class action plaintiffs, take advantage of this lapse to gain leverage in a claim of fiduciary breach. It is not a nice surprise for a board member to be a named defendant. The best protection from fiduciary liability is to understand when one is a fiduciary, pay attention, and act reasonably. The fear of ERISA fiduciary liability is overblown, but being a fiduciary and not consciously acting in that role is a liability gotcha.