Zanglein and Stabile on Rendering Retirement Plan Investment Advice for a Fee

Retirement plans governed by ERISA must be established and maintained under written agreements authorizing fiduciaries to control and manage the plan's operation and administration. ERISA generally considers an entity a fiduciary to the extent that it holds discretionary authority or responsibility for administering an employee benefit plan. In this Analysis, Jayne Zanglein and Susan J. Stabile discuss the rules for fiduciaries who render retirement plan investment advice for a fee. They write:

Under the Employee Retirement Income Security Act (ERISA), an "investment manager" must acknowledge its status as a fiduciary in writing and must be a registered investment adviser, a bank, or an insurance company. An investment manager also must have "the power to manage, acquire, or dispose of any asset of a plan" and therefore exercises discretionary authority or control with respect to plan assets.

Regulations issued by the United States' Department of Labor (DOL) describe what constitutes investment advice.

Under those regulations, a person renders investment advice if she:

(i) renders advice to the plan as to the value of securities or other property, or makes recommendations as to the advisability of investing in, purchasing, or selling securities or other property; and

(ii) ...directly or indirectly...

(A) has discretionary authority or control...with respect to purchasing or selling securities or other property for the plan; or

(B) renders any advice...on a regular basis... [with the understanding] that such services will serve as a primary basis for investment decisions with respect to plan assets, and that such person will render individualized investment advice to the plan based on the particular needs of the plan regarding such matters as, among other things, investment policies or strategy, overall portfolio composition, or diversification of plan investments.

Under this definition, any person who advises the trustees as to plan investments for a fee is a fiduciary. However, an investment advisor is a fiduciary only with respect to plan assets over which he has discretionary authority, control, or responsibility.

(footnotes omitted)

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