ERISA INSIDER VOL. I, ED. VI: How To Select An Independent Fiduciary For Your ERISA Covered Employee Benefit or Retirement Plan

There are exactly 3 criteria you should look for when hiring an Independent Fiduciary to administer, operate or offer advice to your ERISA-covered plan.

Dear Employer,

Are you thinking about hiring an Independent Fiduciary to assist you in one or more areas of your organization’s Health & Welfare or Retirement Plan?

As with accountants and lawyers, independent fiduciaries specialize in a variety of fields – and certain positions within your Health & Welfare Plan or Qualified Retirement Plan under ERISA require specific skill sets.

That’s why the selection of the right Independent Fiduciary to help you administer, operate or otherwise make decisions about your plan is crucial to your success.

In this case, success can be defined as developing and maintaining a customized plan that meets your company’s strategic and financial goals, while remaining compliant with all of the laws & regulations that govern these plans along the way.

That’s why the selection process can take time.

As a business owner or executive, you have to ask the right questions to ensure the fiduciary you are talking to is truly an expert in their field.

Otherwise, you may wind up with a health plan or retirement plan that’s actually costing you and your employees MORE than it should…

…and you could even wind up getting hit with an audit notice from the Department of Labor for possible compliance issues under Title I of the Employee Retirement Income Security Act of 1974, commonly referred to as ERISA.

Both can cost you heaps of money; the latter will cost you your reputation and possibly the ability to keep your business afloat.

Here’s our recommended process for properly selecting an independent fiduciary for your plan:

Ask Yourself These Questions Before Interviewing Independent Fiduciaries

As with any prominent position in your company, asking the right questions during the interview process is key to gauging whether an independent fiduciary is a good fit.

Before you set up your meetings, it is important to get very clear on exactly what you want in a fiduciary and how this person can best serve your organization.

Let’s start with the how.

Question #1 – What role will this person play in your Fiduciary Governance structure?

This is a crucially important question to answer so you know exactly what qualifications and experience an independent fiduciary needs to serve your plan.

It’s important to consider the 3 main fiduciary roles under ERISA for plan governance.

These are your:

  • 3(16) Plan Administrator – responsible for overseeing the day-to-day operations of your plan, maintaining plan documents and records, and filing government paperwork such as your annual Form 5500
  • 3(21) Investment Advisor – responsible for providing advice about investments made involving plan assets
  • 3(38) Investment Manager – responsible for making investment decisions on behalf of your plan and maintaining an investment portfolio of plan assets

Each of these fiduciary roles require specialized knowledge in certain areas of accounting, finance and legal compliance.

Once you decide which role(s) you are looking to hire an independent fiduciary to fulfill, you will be able to narrow your list of interview questions and focus on finding the best individual to carry out the necessary duties.

*See ERISA Insider Volume I: Edition I to learn more about the different types of fiduciary roles and their responsibilities.

Question #2 – Does this person have experience in ERISA compliance, and related laws? And, does he or she have experience dealing with the Department of Labor and IRS on behalf of clients?

Another important quality of an Independent Fiduciary working on behalf of your Health & Welfare or Retirement Plan is his or her experience with legal compliance.

Specifically with ERISA and its related laws, and the IRS Code.

Fiduciaries who manage plan assets, maintain plan documents and records, or otherwise contribute to the management of your plan must be experts in the laws that govern their activities.

While your ERISA legal counsel should provide you with sound advice and compliance remedies, any fiduciaries associated with your plan also need to be competent and careful when carrying out their duties to protect you against the very real possibility of an Employee Benefits Security Administration (EBSA) audit.

(EBSA is the government agency in the Department of Labor that is tasked with enforcing employee benefit and retirement plan compliance under Title I of ERISA.)

ERISA lawyers are not always equipped with the time and resources to monitor every transaction to ensure that you are not making Prohibited Transactions or engaging in any forms of self-dealing.

One sign that an Independent Fiduciary is an expert in these areas of compliance is if he or she has a track record of dealing with the Department of Labor and/or the IRS.

An experienced fiduciary has likely filed and reviewed hundreds of annual reports and other filings with these agencies on behalf of clients, and knows exactly what kinds of paperwork errors tip government officials off to possible compliance issues in an ERISA-covered plan.

Question #3 – Can this person protect your reputation?

By answering the first two questions, you should be able to determine whether or not an independent fiduciary is fully equipped to handle the job you are really hiring them for.

Of course, the main duties of an ERISA fiduciary are to provide you with the best advice for running a strong Health & Welfare or Retirement Plan, while executing the best practices for keeping you legally compliant.

But, the real benefit he or she offers (however intangible), is protecting your firm’s reputation as a strong, reliable and ethical force in an otherwise cut-throat industry.

All it takes is one participant complaint to the DOL to set the audit process in motion.

And, it only takes one finding of a civil or criminal violation to make your business’s internal error become public knowledge.

In 2020 and beyond, no company can afford to take a hit to its reputation like violating employee benefit and retirement plan security laws that could potentially do damage to its employees and their beneficiaries.

Not to mention the financial burden in legal fees, court costs, fines, penalties & excise taxes that may result from such an investigation…

Look For These 3 Criteria When Selecting An Independent Fiduciary To Protect Your ERISA Plan

Once you’ve answered these guiding questions as to how an independent fiduciary can best serve your firm, you next need to determine the criteria behind what makes a good ERISA fiduciary.

At the ERISA Advisory Group, we always say there are exactly 3 qualities you need to look for when hiring an Independent Fiduciary for your plan.


Having a fiduciary you can trust is key to making any Health and Welfare or Qualified Retirement Plan successful.

Similar to when you select an accountant or lawyer, the fiduciary in charge of your ERISA-covered plan needs to be someone who answers the phone when you call, and is always ready to provide solutions to problems.

And, do it fast.

Nobody would want to work with a CPA, for example, who rushes tax forms and makes careless mistakes that result in notices and penalties from the IRS.

Likewise, you can’t afford to work with a firm or an independent fiduciary where you’re just a number in a pile.

Your ERISA fiduciary needs to care about your plan as much as you, and your participants and beneficiaries do.

Sloppy mistakes, long waits to return your phone calls, and inadequate answers to your questions and concerns are unacceptable.

Establishing trust is the only way to ensure that your fiduciary will be there for you when you need him or her most.


All fiduciaries are bound by a timeless principle known as the “Prudent Person Rule”.

This rule states that your ERISA fiduciary will act with prudence and expertise when making decisions and offering advice on behalf of your plan.

In other words, he or she would never tell you to do something that they wouldn’t do themselves.

Like a good president, military general or lawyer, a fiduciary must attack problems by viewing all available options and make decisions, or recommendations, about the best course of action only AFTER considering the facts.

This is vital because it’s the only real way to ensure the interests of plan participants & beneficiaries are placed above your organization or any individual.

Putting plan participants & beneficiaries’ interests first is the core of fiduciary responsibility, and is the primary reason why ERISA was passed into law.


Last, but certainly not least, is the independent relationship an ERISA fiduciary must maintain with your business and its employees.

An independent fiduciary is not your friend or your partner.

He or she is someone who offers an outside, independent perspective as to the best course of action your Health & Welfare or Retirement Plan should take based on a set of facts.

If this independent relationship is compromised, you run the risk of making Prohibited Transactions with parties-in-interest, or self-dealing, which could lead to a DOL audit of your plan.

When you engage in transactions or other activities that benefit your business, other businesses, or any individual above your plan participants & beneficiaries – you are breaking the law.

Once the DOL catches on and the EBSA launches an investigation into these matters, it often results in serious civil and criminal penalties (including potential prison time).

The only way to truly safeguard against this is by dealing with fiduciaries who remain independent at all times.

Watch Out For These Red Flags That Should Stop You In Your Tracks

If you ever interview someone to be a plan fiduciary who tells you one of the following things, end the conversation immediately:

1. Promises to increase revenue or provide other favorable monetary outcomes for your organization or its executives.

While an independent fiduciary can help to reduce costs and make better financial decisions regarding plan assets, his or her job is not to help your organization make more money.

This would likely be a case of self-dealing, and when discovered could lead to criminal charges and potential prison time.

2. They provide TPA services or brokerage services but won’t agree to take on any personal liability for the plan.

We often see insurance brokers, TPAs and other independent contractors disguise their activities as fiduciary roles, when really they are only performing ministerial tasks.

If he or she does not explicitly agree to perform fiduciary functions and take on personal liability for their involvement in the plan, they are not a fiduciary.

Any mistakes made will fall on the shoulders of the legally appointed plan fiduciaries, and those people will be held personally accountable to pay any fines, penalties or excise taxes if your plan is ever audited and compliance errors are uncovered.

3. They will be a partner, friend or offer a “win-win” relationship.

As mentioned earlier, an independent fiduciary is not your friend.

While you can and should maintain a friendly working relationship with any person providing services to your business, a fiduciary acts on behalf of plan participants & beneficiaries.

Not the business owners, executives or any individual or company that deals with your plan.

Any “win-win” relationship that results in favors, monetary or otherwise, would be a legal breach in fiduciary responsibility.

Hire A Prudent Expert You Can Trust To Be Your ERISA Independent Fiduciary

If you are looking to hire an independent fiduciary to serve as your Plan Administrator, Directed Trustee or Named Fiduciary, then schedule a free consultation with the ERISA Advisory Group and we will see if we can help you.

Our ERISA Consultants & Independent Fiduciaries have been working with Health & Welfare and Qualified Retirement Plans since 1995, providing services for:

We’d be happy to answer your questions and offer potential solutions to getting your plan on the right track, and keeping you ERISA compliant.

Contact The ERISA Advisory Group

Feel free to reach out to our President, William Kropkof, directly at Or, book a free consultation to get advice right now.