401(k) Plan Trustee

The Plan Sponsor is responsible for appointing and monitoring the activities of the Trustee(s), unless the plan document allows for the delegation of this responsibility to another fiduciary.

General Duties

Plan trustees usually have exclusive authority over the management of plan assets, unless the plan document provides otherwise. In many instances, plan documents will provide for delegating control to others, such as providing plan participants the right to self-direct their investments, or delegating the management of investment decisions to an investment manager. Trustees have certain general duties relating to managing and administering the assets of a qualified retirement plan for which they are responsible. Those duties include the following:

• Trustees must administer the plan by the documents and instruments governing the plan.
• Trustees are required to administer the plan for the exclusive benefit of plan participants and their beneficiaries.
• Trustees must act by the standard of care established under ERISA. That standard is defined as “with the care, skill, and prudence 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.
• Trustees must diversify plan investments to minimize the risk of large losses (unless it is clearly prudent not to do so).
• Trustees are not permitted to engage in Prohibited Transactions. Prohibited Transactions are described in ERISA Section 406 and include the sale, transfer  or exchange of assets, goods or services between the plan and any “party in interest.”  A party in interest includes an employer, employee, fiduciary, persons providing services to the plan and related parties.
• Trustees are required to  value qualified plan assets at least annually at their “fair market value.”

Prohibited Transactions

There are prohibited transactions that trustees, as well other plan fiduciaries, must avoid. The Plan Sponsor is responsible for ensuring that prohibited transactions are avoided unless the plan’s governing documents allow the responsibility to be delegated to another plan fiduciary. The following prohibited transactions deal specifically with Trustees:

1. Trustees are not permitted to “self-deal” with plan assets (using plan assets to benefit their account).
2. Trustees are not permitted to engage in conflicts of interests.
3. Trustees may not receive compensation from any party dealing with the plan in connection with a transaction involving plan assets.
4. Trustees who are employed by the Plan Sponsor may serve as trustees, but they are not entitled to be compensated by the plan for acting as Trustees.