Understanding the Role of a Fiduciary in a Retirement Plan

If you sponsor a 401(k) or other retirement plan for your employees, you probably know the term “fiduciary” gets tossed around a lot. It sounds formal — maybe even intimidating — and it’s often followed by a warning about the serious responsibilities involved. But what does being a fiduciary actually mean and why should you care?

The Core Idea: Acting in Someone Else’s Best Interest

At its heart, being a fiduciary means you have a legal — and ethical — obligation to act in someone else’s best interest. In the case of a retirement plan, that “someone else” is your employees and their beneficiaries. It’s not about what’s easiest for you, what benefits the company the most, or what’s most convenient. The yardstick is always: “Does this decision help our plan participants get the best possible outcome for their retirement savings?”

Who’s a Fiduciary? (Hint: It Might Be You)

You might think only big investment firms or outside plan administrators are fiduciaries. Not true. Under ERISA (the federal law governing retirement plans), you’re a fiduciary if you:

• Have discretionary control over plan management or plan assets
• Give investment advice for a fee
• Have authority to make decisions about the plan’s administration

That can include:

• Business owners
• HR managers
• Members of a plan committee
• Certain third-party service providers

If you make decisions about the plan or its investments, you’re wearing a fiduciary hat — whether you realize it or not.

The Main Fiduciary Duties

While there’s plenty of legal language in ERISA, these duties boil down to a few practical principles:

1. Act Solely in the Interest of Participants and Beneficiaries
   Every decision should aim to help employees save for a financially secure retirement. Even if there’s a potential benefit to the company, that can’t come at the expense of participants.
2. Act Prudently
   You’re expected to make decisions with the same care, skill, and diligence that a knowledgeable person would use in a similar situation. You don’t have to be an investment expert yourself, but you do need to seek out expertise when needed.
3. Diversify Investments
   Don’t put all the plan’s eggs in one basket. The investment lineup should help reduce the risk of large losses.
4. Follow the Plan Document
   Your plan document is your rulebook. Straying from it — unless you’re following proper amendment procedures — can get you into hot water.
5. Pay Reasonable Plan Expenses
   Plan sponsors must ensure that all fees and expenses associated with the plan are reasonable and appropriate for the services provided. That means periodically benchmarking costs against comparable plans.

Why This Matters to You

Failing to meet fiduciary responsibilities can lead to personal liability — not just corporate liability. That means if something goes wrong and participants lose money due to a breach of duty, you could be on the hook personally. This isn’t meant to scare you — it’s meant to stress why awareness and good process matter. The good news is that many fiduciary risks can be managed or reduced with a few proactive steps.

Common Fiduciary Responsibilities in Practice

So what does being a fiduciary look like in day-to-day plan management? Here are some common examples:

• Selecting and Monitoring Investments. You’re responsible for choosing the plan’s investment options and reviewing them regularly to ensure they’re still appropriate. If a fund starts underperforming or fees become excessive, you need to take action.
• Reviewing Service Providers. This includes selecting a recordkeeper, investment advisor, and other vendors, then reviewing their performance and fees over time.
• Keeping Good Records. Documenting why decisions were made can protect you if your choices are ever questioned.
• Communicating Clearly with Participants. You must ensure participants have the information they need to make informed investment decisions.

Five Ways To Be a Strong Fiduciary Without Losing Sleep

You don’t have to turn into a full-time ERISA attorney to fulfill your fiduciary duties. Here are a few practical habits that make a big difference:

1. Build a Process and Stick to It
   Create a regular schedule for reviewing investments, fees, and provider performance. Make meeting agendas, take notes, and keep them on file.
2. Get Expert Help
   If you’re not an investment expert, consider hiring a qualified advisor who accepts fiduciary responsibility for the advice they give. This can shift certain duties off your plate and add professional oversight.
3. Benchmark Fees
   At least every couple of years, compare your plan’s costs to industry standards. High fees can quietly eat away at participants’ savings.
4. Educate Your Committee
   If you have a retirement plan committee, make sure members understand their role and responsibilities. A little training goes a long way.
5. Keep Participant Interests Front and Center
   If you’re ever unsure what to do, ask: “Would this decision help our employees save more effectively for retirement?” That question often points you in the right direction.

Final Thoughts

Being a fiduciary for your company’s retirement plan is serious business, but it doesn’t have to be overwhelming. Think of it less as a legal risk and more as a structured way to make sure your employees have the best shot at a secure retirement.

A fiduciary’s role is to put participants first, act with care, and make decisions that stand up to both legal standards and common sense. With the right process, a bit of documentation, and help from qualified experts when needed, you can meet your fiduciary responsibilities confidently — and sleep well at night knowing your plan is in good shape.

Informational Resources: PLANSPONSOR Magazine: “Fiduciary Basics For New Plan Sponsors” (April 1, 2025); Internal Revenue Service: “Meeting Your Fiduciary Responsibilities” (accessed August 11, 2025); T Rowe Price: “Helping Plan Sponsors Understand Their Fiduciary Responsibilities” (accessed August 12, 2025).