Plan Sponsors Confused About Fiduciary Responsibilities

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Author

Deb Dupont
Assistant Vice President Workplace Benefits Research, Institutional Retirement
LIMRA and LOMA

July 2025

Being a retirement plan sponsor isn’t easy. Sponsoring a qualified retirement plan comes with a host of responsibilities, functions and potential pitfalls — many of which can be confusing and are often considered onerous.

And there is an “F” word that sponsors must consider: Fiduciary. Paraphrasing the Department of Labor:

The Employee Retirement Income Security Act (ERISA) requires that those persons or entities who exercise discretionary control or authority over plan management or plan assets, anyone with discretionary authority or responsibility for the administration of a plan, or anyone who provides investment advice to a plan for compensation or has any authority or responsibility to do so are subject to fiduciary responsibilities. Plan fiduciaries include, for example, plan trustees, plan administrators, and members of a plan's investment committee.

The primary responsibility of fiduciaries is to run the plan solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits and paying plan expenses. Fiduciaries must act prudently and must diversify the plan's investments in order to minimize the risk of large losses. In addition, they must follow the terms of plan documents to the extent that the plan terms are consistent with ERISA. They also must avoid conflicts of interest. In other words, they may not engage in transactions on behalf of the plan that benefit parties related to the plan, such as other fiduciaries, service providers or the plan sponsor.

Fiduciaries who do not follow these principles of conduct may be personally liable to restore any losses to the plan or to restore any profits made through improper use of plan assets. Courts may take whatever action is appropriate against fiduciaries who breach their duties under ERISA, including their removal.

LIMRA studies defined contribution (DC) plan sponsors on a regular basis. Between late 2024 and early 2025, we conducted research surveying 1,000 plan sponsors to better understand how fiduciary roles and responsibilities are managed within companies and plans. Our goal was to assess how well these sponsors understand some basic fiduciary concepts and the extent to which they recognize their responsibilities associated with common fiduciary arrangements.

Most commonly, plan sponsors say that their plan’s record advisor (46 percent) and/or record keeper (26 percent) are plan fiduciaries. Our 2023 research aligns with findings from advisors themselves — 53 percent report having some sort of fiduciary responsibility to the plans they advise.

What’s inconsistent here is that employers, by simply sponsoring a retirement plan — are considered fiduciaries. All employer representatives in our sample have some degree of decision-making authority for the plan, yet most do not consider themselves fiduciaries. Eighty-four percent of responding plan sponsors say they serve either in a shared (30 percent) or sole (54 percent) decision-making capacity on their plans, with the remaining 16 percent describing their role as simply “providing input”. But only 38 percent identify themselves as plan fiduciaries (Figure 1).

Figure 1. Identifying Plan Fiduciaries

There are three common categories of fiduciary services or duties that plan sponsors often look to external resources for support in managing:

3(16), or administrative support
3(21), or investment selection recommendations and documentation
3(38), or investment management

Outsourcing these functions, or at least hiring independent consultants to help manage these functions, does not completely absolve an employer of responsibility. This even holds true, according to many, at least to some degree, in the burgeoning pooled employer plan (PEP) market — where a pooled plan provider (PPP) assumes the role of plan sponsor and selects the various support entities that fulfill different operational fiduciary roles.

We asked our survey respondents — who were selected and screened to have a role in plan management — about these responsibilities. When asked to identify these functions and the code sections under which they fall, in no instance did even half consistently and correctly identify these roles (Figure 2).

Figure 2. Identifying Fiduciary Functions

For good measure, we also asked about “investment education,” which is a potentially key role in helping employees understand their plan and options and make appropriate decisions, but is not considered a fiduciary role or responsibility, according to the U.S. Department of Labor, Employee Benefits Security Administration. Yet one-third identified this as a “labeled” fiduciary function.

Fewer than 20 percent of plan sponsors selected “unsure.” Sponsors of larger plans were more likely to correctly identify fiduciary roles, but in no instance did significantly more than half of responding sponsors correctly identify the fiduciary role.

Properly understanding fiduciary roles and responsibilities is part and parcel of the responsibility of managing a plan and is critical to protecting both employer and employee interests and successful plan outcomes for both. The fact that plan sponsors and decision-influencers consistently misidentify fiduciary roles — and their own responsibilities as plan fiduciaries — is concerning and presents an opportunity for those who serve in administrative and advisory roles to plans. When asked where they go for more information — particularly on legislative and regulatory issues — plan sponsors consistently list plan advisors/consultants (46 percent) and record keepers (39 percent) as their primary go-to resources.

In many instances, advisors themselves — especially those whose institutional plan business is incidental to their wealth management practices — as well as their firms can benefit from the information, resources and fiduciary management tools that are regularly part of a record keeper’s services suite.

A quick scan of the headlines reinforces the idea that record keepers are increasingly viewed as responsible for plan metrics and management, another clear indication of the responsibility and challenge involved in helping employers appreciate and understand their roles and responsibilities as plan sponsors and fiduciaries.

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