Trust Updates Archive

Pensions 401k SEC Banks Trusts Labor Regulation News Fiduiciary Conflicts Revenue Sharing 12b-1 The Accidental Fiduciary -- Confusion Leads to Conflicts

(Oct. 7, 2008--Chicago, IL) -- The failure of pension-plan sponsors to determine if a provider is a fiduciary leads to gaps in plan oversight and conflicts of interest, according to a GAO study. The problem is compounded by plan sponsors who lack an adequate understanding of who is a fiduciary under ERISA.

The study was requested by George Miller, Chairman, House Committee on Education and Labor, and a critic of existing disclosure requirements and revenue-sharing arrangements.

The surveys found that most service providers understand fiduciary roles better than plan sponsors. Plan providers, says the GAO, generally avoid being identified as fiduciaries to limit liability, even though their actions or duties may define them as fiduciaries under ERISA.

Differences in how advisers and other providers are compensated also have plan oversight and liability implications. "Hidden" fees can mask the existence of a conflict of interest.

Failing to understand the fee structure can result in a fiduciary breach, say regulators. According to the GAO, the selection of a "free" 401(k) plan is more likely to be made by the human resources department, rather than the finance department


For more on this topic, see the current issue of Trust Regulatory News.


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