A friend of mine called me up a few weeks back and was telling me a story how he had a debate with Jeff Richie from Vantage Benefits at a conference a few years back. Richie claimed he had some writing from the Department of Labor that says that a plan sponsor who hires an independent fiduciary cedes that fiduciary function that they delegate. One of the arguments for hiring an independent fiduciary in a §3(16) or §3(38) setting is that these fiduciaries will assume discretionary control and the liability that goes with it. Through all the marketing you see and hear, it’s claimed that the plan sponsor is not going to be on the hook as a fiduciary.
While hiring an independent fiduciary is likely a settlor function, the plan sponsor doesn’t shed all their liability because they will still retain liability as a plan settlor. The point here is that if the allegations against Vantage are true and they stole millions from clients, what does it matter if a plan sponsor is not liable as a fiduciary because they’re still liable for hiring the fiduciary that stole in the first place? Hiring an independent fiduciary will protect a plan sponsor in most instances, but when hiring an incompetent or corrupt fiduciary, it doesn’t really matter. One of the reasons that plan sponsors are suing Vantage is because it’s pro-active method of covering their rear end since they’re on the hook for hiring a fiduciary that stole plan assets.
In the scheme of things, what difference does it make if a plan sponsor is being sued for hiring a stealing fiduciary? At the end of the day, the plan sponsor is liable for hiring a fiduciary who stole.