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Administrative Responsibilities Under ERISA

The Employee Retirement Income Security Act (ERISA) is a federal law that applies to most employer-supplied benefit plans. ERISA imposes several responsibilities upon the administrators of an ERISA-governed plan. Under ERISA, if a plan administrator is not specifically named by the plan, the sponsor of the plan is considered the administrator. The sponsor of the plan is the employer or labor organization that set up the ERISA-governed plan.

The most important responsibility of a plan administrator is to act as a fiduciary, which is a person who is charged with the duty of acting in interests of another person or persons. Within the context of ERISA, a fiduciary is to discharge his or her duties with respect to the plan solely in the interests of the participants and beneficiaries of the plan and with the exclusive purpose of providing benefits to plan participants and beneficiaries and defraying the reasonable expenses of administering the plan. It is interesting to note that when a plan's administrator is not the plan's sponsor, the administrator's duty of loyalty is to the participants and not the sponsor.

ERISA provides that anyone who exercises discretionary authority or control in the management of an ERISA-governed plan or any authority or control in the management and disposition of a benefit plan's assets is a fiduciary. ERISA imposes a "prudent man standard of care" upon fiduciaries, which requires them to act "with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims."

One general legal duty of a fiduciary who manages the assets of another is to avoid making speculative or otherwise imprudent investments of the assets. ERISA specifically directs plan administrators to diversify a plan's investments in order to minimize the risk of large losses unless prudence clearly dictates otherwise under the circumstances. More generally, a plan administrator must discharge his or her duties in accordance with the governing plan documents insofar as they comply with ERISA.

ERISA makes any fiduciary of an ERISA-governed plan who breaches any of the responsibilities, obligations, or duties imposed by ERISA personally liable for any losses of the assets of the plan that are attributable to the breach of fiduciary duty. A fiduciary can also be removed from his or her position as a fiduciary in the case of a breach of fiduciary duty.