Representatives from our firm recently spoke at a seminar for financial planners and one of the attendees had a question that can be important for plan sponsors: ‘What’s the difference between a trustee and a fiduciary?’ First, a trustee is always a fiduciary, but not all fiduciaries are trustees. Here’s a definition of each:
Trustees take in and manage funds, and make distributions to beneficiaries. Plan sponsors need to choose individual trustees, such as the owners or officers of the business. Another option is to hire an institutional trustee at a bank, insurance company or other financial institution.
Fiduciaries exercise discretionary authority or control over the management of the plan or its assets. They may also be people who are paid to give investment advice. Rather than a title, a person’s functionary relationship defines whether or not the person is a fiduciary. Attorneys, accountants, actuaries, brokers, and record-keepers are not fiduciaries unless they influence plan decisions or have responsibility for plan assets.