Capital Ideas^™ 
Investment insights from Capital Group

You’ve become a fiduciary to your company’s retirement plan. Now what?

Getting started can feel daunting. For many plan sponsors and fiduciary committee members, the term “fiduciary” conjures images of complex regulations, legal risk, and responsibilities that feel far outside day‑to‑day roles. There often isn’t a clear roadmap when you begin — but that’s OK.

When you act as a fiduciary to a retirement plan, you are making decisions that can affect participants' retirement savings. This is an important responsibility that should be taken seriously. At the same time, fiduciary responsibility isn’t about perfection or technical know-how.

In this guide, we’ll explain what it means to be a fiduciary, responsibilities that typically come with the role, and how plan committees can approach oversight in a practical and manageable way.

Who is a fiduciary?

Fiduciary status is generally defined by actions — not titles. Under ERISA, a fiduciary is generally anyone who exercises discretionary authority or control over a retirement plan or its assets, or who provides investment advice to the plan for a fee. That means you may be a fiduciary based on what you do, regardless of whether you have formally been given that title.

While fiduciary roles differ in scope and discretion, each carries responsibility when acting within its authority. Some individuals serve as fiduciaries through committee membership, while others do so in more formal capacities. Common fiduciary roles include:

What it means to be a fiduciary

At its core, being a fiduciary means acting in the best interest of plan participants and beneficiaries. Here are three of the guiding principles that shape fiduciary conduct under ERISA:
 

• Exclusive benefit rule (duty of loyalty): Act solely in the interest of participants and beneficiaries — not those of the plan sponsor, financial professional or third-party administrator.
   

• Prudent expert rule (duty of prudence): Make fiduciary decisions “with the care, skill, prudence and diligence” that a prudent expert would. These decisions require appropriate knowledge and experience. That is, intentions and “your best” are not always sufficient. Resources and appropriately knowledgeable counsel must be sought where any are lacking.
   

• Investment diversification: Ensure that the plan’s investment options are adequately diversified. Although an important fiduciary duty, it typically presents less risk to fiduciaries overseeing participant-directed defined contribution retirement plans. These plans typically offer a broad array of investment funds and allow participants to decide which investments to choose.
   

ERISA is often described as a “law of process.” Fiduciaries aren’t expected to predict the future or make perfect decisions. Rather, they are expected to make informed decisions, rely on appropriate expertise when needed, and be able to demonstrate a prudent process for how decisions were made and monitored over time.

Understanding committee responsibilities

Depending on the size of the plan, a committee of decision-makers may help fulfill the duty of prudence. In smaller organizations, a single committee usually covers decisions about the plan’s investments and administrative matters. Larger employers, especially those with complex plans, may create two committees, one for investment and another for administrative oversight. 

Investment oversight typically includes selecting and reviewing the plan’s investment lineup, including the qualified default investment alternative (QDIA). Many plans formalize this approach through an Investment Policy Statement (IPS), which outlines how investments are selected, evaluated and replaced. Once an IPS is in place, committees must follow it. So it may be a good idea not to make it too restrictive or prescriptive. It should strive to be an effective guide for decision-making.

Administrative oversight generally involves overseeing the plan's day-to-day administration and operations. This may include selecting, reviewing and monitoring recordkeepers, third‑party administrators and other service providers.

You can’t completely outsource fiduciary responsibility

Many plan sponsors rely on advisors, recordkeepers and other service providers to support plan operations. In some cases, fiduciary functions can be delegated to other fiduciaries. For example, hiring a 3(38) investment manager does reduce your fiduciary liability by outsourcing discretion over the investment lineup.

But even when tasks are delegated, fiduciaries still must carefully select service providers and regularly review their performance. Responsibility doesn’t disappear; you retain your obligation to prudently select and monitor their activities.

ERISA focuses on how decisions are made. Fiduciaries are not expected to get every outcome right. What matters is using a thoughtful approach, acting in participants’ best interests and being able to explain what decisions were made and why.

Expanding oversight: Cybersecurity 

Cybersecurity is now widely recognized as a fiduciary consideration. Committees are expected to understand at a high level how participant data and plan systems are protected and how service providers approach cybersecurity.

As technology evolves, committees may also want to understand how service providers are using emerging technologies, including artificial intelligence, in connection with plan administration and participant services. The goal is not technical expertise, but asking reasonable questions, understanding the answers and maintaining appropriate oversight.

Keep a practical framework

Being a fiduciary involves following a reasonable approach, using appropriate guidance, acting in participants’ best interests and keeping a clear record of how decisions are made.

With the right framework in place, fiduciaries can approach retirement plan oversight with greater confidence. When in doubt, these guardrails can help guide decision‑making:
 

• Delegation doesn't eliminate oversight responsibilities. Hiring outside service providers can reduce fiduciary responsibilities, but fiduciaries remain responsible for prudent selection and ongoing monitoring.
  
  
• If you can’t explain how a decision was made, it’s difficult to defend. A strong process only helps when decisions and rationale are clearly captured.
  
  
• Fiduciary status depends on function, not title. Fiduciary status is generally determined by the authority and responsibilities you exercise, not by job title.