Many times, an employer, as the retirement plan fiduciary, may choose investment options or a product that might not be a good fit for the employee base or that may be too heavily weighted toward a certain asset class or fund manager. 
This can cause an inappropriate choice of investments, allocations that are too aggressive and, ultimately, confusion and anxiety among employees.
During a severe down market, such as today's, this confusion and anxiety can significantly increase fiduciary concerns. But there is good news on this front.
Under the Employee Retirement Income Security Act, there are no special fiduciary duties that apply in a down or volatile market. Regardless of market conditions, a sound and documented process for making fiduciary decisions will protect plan fiduciaries, no matter what is happening with the financial markets.
However, deficient fiduciary practices are often exposed during a down or volatile market. At the very least, participant inquiries and scrutiny will increase if significant losses in plan investments occur.
As a result, fiduciaries may be accountable for showing they are not responsible for plan losses. So, fiduciaries should be prepared to show compliance with ERISA duties through adherence to a sound fiduciary process.
Who is a fiduciary? Simply stated, a fiduciary is a person who exercises discretionary authority over a company's retirement plan management.
Often, a committee is designated to perform some or all of these functions. This is preferred because it allows for clearly delineated roles and responsibilities for administering the plan. It is also easier to create a formal process for fiduciary actions (e.g. periodic committee meetings, periodic reviews) that can be documented. Finally, an employer acting as plan fiduciary may sometimes find it difficult to meet its obligations to plan participants if the employers' and participants' interests conflict. Having a committee in place minimizes potential for this.
Nonetheless, in small employer situations, there is usually no committee designation. The employer is often the plan fiduciary by default.
This is not a preferred method because an employer is less likely to have the clear roles and formal processes discussed above, which makes it more difficult to document and defend fiduciary decisions. In addition, plan sponsor fiduciaries are more likely to face the conflicts discussed above, which also make their decisions harder to defend if challenged. Finally, these fiduciaries generally lack the expertise to manage a retirement plan. For example, employers often do not have the expertise to select and maintain an appropriate investment lineup.
Service providers can provide the expertise that employers lack by offering certain fiduciary services. In so doing, they foster retirement plan adoption among the small and micro employers who cannot take on the crucial role of fiduciary without expert assistance.
Individuals who act as fiduciaries and do not meet their fiduciary obligations will be held accountable. Serious consequences include personal liability to the plan for: losses resulting from a fiduciary breach, any profits made through the improper use of plan assets, other equitable or remedial relief that a court may find appropriate, and additional civil penalties.
Steps fiduciaries should take in order to fulfill plan obligations limit potential liability and provide appropriate investment options include those shown in the box.
