A recent article by Marcia S. Wagner in Investment News brought to light a district court decision that has implications for how retirement plan sponsors should monitor their adviser.
Employee Retirement Income Security Act of 1974, Section 405(d)(1), provides that if a named fiduciary appoints an investment manager to manage the assets of a plan, then no trustee shall be liable. In the lawsuit, the Department of Labor took a curious position, saying that since the plan administrator and named fiduciaries of the plan were not trustees, they could not take advantage of the safe-harbor relief under ERISA. The District Court for the Western District of Pennsylvania disagreed with the DOL. It concluded that ERISA intended to grant safe-harbor relief to fiduciaries who have been granted control of the assets of a plan and who have properly appointed an investment manager to manage plan assets, even if the named fiduciaries are not designated as trustees.