Who Is a Fiduciary?
Under ERISA, a person is a fiduciary to the extent they exercise discretionary authority or control over plan management or assets, render investment advice for compensation, or have discretionary authority over plan administration. The key word is "discretionary" — ministerial functions (processing claims according to established procedures) are not fiduciary functions.
| Function | Fiduciary? | Notes |
|---|---|---|
| Deciding whether to offer a health plan | No (settlor function) | Designing the plan is a business decision, not a fiduciary function |
| Selecting a TPA or carrier | Yes | Discretionary authority over plan administration |
| Deciding benefit claims | Yes | Discretionary authority over plan administration |
| Amending the plan | No (settlor function) | Plan design decisions are settlor functions |
| Processing claims per established procedures | No (ministerial) | Ministerial functions are not fiduciary functions |
The Prudent Expert Standard
ERISA requires fiduciaries to act with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person 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. This is the "prudent expert" standard — not the "prudent layperson" standard.
IQ Insight
The prudent expert standard does not require fiduciaries to be experts — it requires them to act as if they were. This means engaging qualified advisors, documenting the decision-making process, and following a prudent process for major plan decisions. A fiduciary who follows a prudent process and makes a reasonable decision is protected even if the outcome is unfavorable.
Fiduciary Liability
ERISA fiduciaries who breach their duties are personally liable for any losses to the plan resulting from the breach. This is not corporate liability — it is personal liability. Fiduciaries can be required to restore losses to the plan from their personal assets.