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ERISA requires that a DC plan have at least one fiduciary – that is, a person or entity either named in the written plan, or through a process described in the plan, as having control over the plan’s operation. The Employee Benefits Security Administration (EBSA) explains: “The named fiduciary can be identified by office or by name. For some plans, it may be an administrative committee or a company’s board of directors. A plan’s fiduciaries will ordinarily include the trustee, investment advisers, all individuals exercising discretion in the administration of the plan, all members of a plan’s administrative committee (if it has such a committee), and those who select committee officials. Attorneys, accountants, and actuaries generally are not fiduciaries when acting solely in their professional capacities. The key to determining whether an individual or an entity is a fiduciary is whether they are exercising discretion or control over the plan.”

For plan sponsors who lack expertise in a specific area such as investment oversight, they may want to engage an investment consultant or other experts to help them fulfill their fiduciary responsibility. In 2011, we spoke at length to David Levine of Groom Law Group regarding fiduciary rules played by plan sponsors and outside advisors, including how to understand primary ERISA fiduciary categories, and what responsibilities fit with each.

In the U.S. system, the core concept of fiduciary, Levine told us, is contained within a single category – an ERISA “3(21) fiduciary.” Beyond this basic definition are various additional roles, such as the concept of the named fiduciary, which generally is a fiduciary named either in a plan document or by a plan sponsor. A named fiduciary is the default plan fiduciary. Others, including advisors, can also be 3(21) fiduciaries. Further, a person can be a 3(16) plan administrator responsible for certain core administrative duties under ERISA. The determination of when a person is a fiduciary or not depends on their exact duties, on whether the duties are discretionary in nature, and on the financial relationship of the person to the plan. The bottom line, Levine says, is that “It’s important to carefully evaluate each situation to determine whether an individual is a fiduciary or not.”

We asked Levine about the plan design and oversight issues that require fiduciary oversight, including selecting the investment lineup and manager. In the case that the plan sponsor would prefer to outsource these duties, what should they consider? Here’s what he told us:

The role and responsibilities for each advisor should be clear and documented within a contract and, depending on the exact circumstances, potentially in the plan document as well. In some cases, the administrative and investment issues are split and managed by different advisors. It’s important that both the investment and administrative issues be addressed, and to clarify who is actually administering the plan. Without clarity, all fiduciary responsibility will, under many standardized plan documents, rest with the plan sponsor – that is, the company.

Within advisor contracts, it’s helpful to identify the exact fiduciary status of the advisor to minimize confusion as to what role the advisor is playing. Of course, each contracting situation is unique, so there is no one-size-fits-all solution.

As plan sponsors and fiduciaries finalize their agreements with providers, you need to understand if this person is really saying, “I will be named as the main fiduciary in the plan document.” Or are they saying, “I will be your co-fiduciary with you,” which really means, “I’m just a fiduciary with your existing plan fiduciary, so we’re all on the hook together”?

The bottom line, Levine told us, is that outsourcing many fiduciary duties to a third party is doable, but “it’s important to really dot the is and cross the ts because this is where people may get caught, especially if they only focus on the investments and not on the administration.”