"I hope BenefitsLink neighbors will help me provide without-fee legal advice to someone who would, without fee, provide her investment advice to a charitable organization's ERISA-governed retirement plan.
The advisor would render advice about (but not decide) investment alternatives for an individual-account plan that provides participant-directed investment. The advisor would have no authority, discretionary or even
non-discretionary, to implement her advice. The advisor is not registered with the [SEC] or any State's regulator because she is not, 'for compensation, engage[d] in the business of advising others[.]' Investment Advisers Act of 1940 Section 202(a)(11), 15 U.S.C. Section 80b--2(a)(11) (emphasis added).
Under ERISA Section 3(21)(A)(ii), 'a person is a fiduciary with respect to a plan to the extent. .. (ii) he
renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan[.]' The Labor department's and courts' interpretations have set up the idea that a commission or other compensation paid or provided, however indirectly, by a third person can be compensation that invokes ERISA Section 3(21)(A)(ii). But this advisor will get no fee, and cannot
get a commission or other payment from a third person. Also, this advisor will get no fee or other compensation for any service beyond investment advice.
How comfortable should I be in advising that the advisor is not the retirement plan's fiduciary? Is there any gap or flaw in reasoning that, absent a fee, the advisor is not the plan's fiduciary?
I recognize that whichever fiduciary decides the
retirement plan's menu of investment alternatives must evaluate, according to ERISA Section 404(a)'s duties, whether it is prudent to consider the advisor's advice. I'll appreciate any ideas from BenefitsLink neighbors."