Fiduciary Duties and ERISA Laws - Ensuring the Security of

Fiduciary Duties and ERISA Laws - Ensuring the Security of Worker Pensions

ERISA stands for the Employee Retirement Income Security Act of 1974. The act is a federal law that mandates certain requirements for pension plans in the private industry. The law is meant to ensure the security and stability of funds employees place in their retirement plans over the course of their working lives. The US Department of Labor enforces the statutes of ERISA.

According to the Department of Labor, ERISA mandates:


The information that must be disclosed to plan participants.

Requirements for how long a plan participant must be employed in order to become eligible for plan participation and plan benefits through their employer, called vesting.

The amount of funds set aside every year in order to pay future pensions, called funding.

Definition of fiduciary duty. Anyone who exercises control over the plan's assets must hold the financial interests of plan participants above their own. Overseers of the plan (called fiduciaries) can be held responsible for losses if they breach their fiduciary duty. In cases of fiduciary breach, ERISA gives plan participants the right to sue.

If you are a beneficiary of a retirement plan, you should know the requirements and bounds of fiduciary duty. Fiduciaries are often company officers, plan trustees, or plan administrators. The names of responsible fiduciaries are required to be listed on a plan document. ERISA states that fiduciaries must uphold four standards of conduct when managing a plan:

1) A Duty of Loyalty: As stated earlier, fiduciaries must have the interests of plan beneficiaries above any other financial interests.

2) A Duty of Prudence: Fiduciaries are required to use care, skill and prudence when making decisions about plan assets. A retirement plan is always at some risk for financial loss-just because a plan loses money doesn't mean that fiduciaries have violated their duty of prudence. What matters is if the fiduciary used a thoughtful process in making financial decisions.

3) A Duty to Diversify Investments: Fiduciaries are required to diversify the types of investments within a retirement plan in order to reduce the risk of major financial losses.

4) A Duty to Follow Plan Documents: Fiduciaries are required to act in accordance with plan documents, as long as those documents are compliant with ERISA standards.

Losses in retirement plans don't necessarily mean that a fiduciary has breached their fiduciary duty. Breaches of fiduciary duty do occur, though, and fiduciaries can be held accountable for their breach in a court of law. If you have suffered major losses in your retirement portfolio and think that it is due to a somekeyword, you should contact the Department of Labor to file a complaint and contact an attorney who specializes in securities litigation in order to consider your legal options.

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