Explain ERISA exclusive purpose and ERISA prudence rule - ANSWER The Exclusive Pur-
pose Rule: A fiduciary must act solely in the
best interest of plan participants.
The Fiduciary Standard of Care: Prudence, Loyalty, Diversification, Follow the Plan Document
Identify actions that might establish a fiduciary relationship - ANSWER assuming signifi-
cant control over another person's property or finances, having a high degree of trust and
confidence placed in you by another party, making decisions on behalf of someone else with
their best interests in mind, providing professional advice in a field where expertise is re-
quired, managing assets on behalf of another person, and entering into a legal agreement
where one party is explicitly designated as a fiduciary, such as a trust or will.
Identify named fiduciaries - ANSWER Persons or entities specifically
named in the plan document
Explain roles and responsibilities of named fiduciaries - ANSWER Discretionary authority
over
management or the
administration of the plan
Identify actions covered by the Best Interest Contract Exemption - ANSWER Acknowledge
fiduciary status for itself and its financial advisers;
Adhere to basic standards of impartial conduct, including: Giving prudent advice that is in
the customer's best interest (i.e., based on the investment objectives, risk tolerance, finan-
cial circumstances, and needs of the retirement investors, without regard to financial or
other interests of the financial institution or financial adviser); Avoiding making misleading
statements; and Charging no more than reasonable compensation
1
,Commit to the impartial conduct standards in an enforceable contract when providing ad-
vice to an IRA owner
Implement policies and procedures reasonably and prudently designed to prevent violations
of the impartial conduct standards
Refrain from giving or using incentives for financial advisers to act contrary to the customer's
best interest
Fairly disclose the fees, compensation, and material conflicts of interest associated with their
recommendations.
Differentiate investment advice and investment education - ANSWER Education = guid-
ance to help others makes their OWN decisions
Advice: significant detail about an employee's personal finances, goals and risk tolerance are
gathered in order to make projections.
Describe the "best interest contract exemption" under the DOL fiduciary regulation - AN-
SWER The Best Interest Contract Exemption permits financial advisers (i.e., an individual
who is a representative of an investment adviser, broker-dealer, insurance company, or bank
or similar financial institution) and the financial institutions that employ them to continue to
rely on many current compensation and fee practices, as long as they meet specific condi-
tions intended to ensure that financial institutions mitigate conflicts of interest and that
they, and their financial advisers, provide investment advice that is in the best interests of
their customers.
Differentiate between 3(16), 3(21) and 3(38) fiduciaries - ANSWER 3(16): • Ensure plan
operates in accordance with ERISA
• Ensure plan follows its terms
• Provide participant notices/disclosures
• Sign and file Form 5500 (Annual return)
• Authorize distribution/loans
• Select and monitor service providers
• Ensure plan expenses are reasonable
2
, 3(21) - ANSWER 3(21): - Represents or acknowledges fiduciary status
Renders the advice pursuant to a written or verbal
agreement, arrangement, or understanding that the
advice is based on the particular investment needs
of the advice recipient, or
Directs the advice to a specific advice recipient(s)
regarding the advisability of a particular investment
or management decision
Usually advises plan sponsor or investment
committee, but does not make decisions alone
3(38) - ANSWER 3(38):Has authority to make all investment changes
Discretion to manage, buy, or sell plan assets
(pooled accounts)
Manager of "managed accounts"
Broker/dealers and brokers cannot be an
Investment Manager
Identify ministerial functions performed by non-fiduciary service providers - ANSWER •
Not exercising any discretionary control
• Ministerial in nature
• Day-to-day job of administering the plan
• Eligibility
• Calculation of benefits
• Preparing Form 5500
Identify required and additional documentation for maintaining plan records according to
fiduciary best practice - ANSWER Required: • Current, SIGNED plan
3
pose Rule: A fiduciary must act solely in the
best interest of plan participants.
The Fiduciary Standard of Care: Prudence, Loyalty, Diversification, Follow the Plan Document
Identify actions that might establish a fiduciary relationship - ANSWER assuming signifi-
cant control over another person's property or finances, having a high degree of trust and
confidence placed in you by another party, making decisions on behalf of someone else with
their best interests in mind, providing professional advice in a field where expertise is re-
quired, managing assets on behalf of another person, and entering into a legal agreement
where one party is explicitly designated as a fiduciary, such as a trust or will.
Identify named fiduciaries - ANSWER Persons or entities specifically
named in the plan document
Explain roles and responsibilities of named fiduciaries - ANSWER Discretionary authority
over
management or the
administration of the plan
Identify actions covered by the Best Interest Contract Exemption - ANSWER Acknowledge
fiduciary status for itself and its financial advisers;
Adhere to basic standards of impartial conduct, including: Giving prudent advice that is in
the customer's best interest (i.e., based on the investment objectives, risk tolerance, finan-
cial circumstances, and needs of the retirement investors, without regard to financial or
other interests of the financial institution or financial adviser); Avoiding making misleading
statements; and Charging no more than reasonable compensation
1
,Commit to the impartial conduct standards in an enforceable contract when providing ad-
vice to an IRA owner
Implement policies and procedures reasonably and prudently designed to prevent violations
of the impartial conduct standards
Refrain from giving or using incentives for financial advisers to act contrary to the customer's
best interest
Fairly disclose the fees, compensation, and material conflicts of interest associated with their
recommendations.
Differentiate investment advice and investment education - ANSWER Education = guid-
ance to help others makes their OWN decisions
Advice: significant detail about an employee's personal finances, goals and risk tolerance are
gathered in order to make projections.
Describe the "best interest contract exemption" under the DOL fiduciary regulation - AN-
SWER The Best Interest Contract Exemption permits financial advisers (i.e., an individual
who is a representative of an investment adviser, broker-dealer, insurance company, or bank
or similar financial institution) and the financial institutions that employ them to continue to
rely on many current compensation and fee practices, as long as they meet specific condi-
tions intended to ensure that financial institutions mitigate conflicts of interest and that
they, and their financial advisers, provide investment advice that is in the best interests of
their customers.
Differentiate between 3(16), 3(21) and 3(38) fiduciaries - ANSWER 3(16): • Ensure plan
operates in accordance with ERISA
• Ensure plan follows its terms
• Provide participant notices/disclosures
• Sign and file Form 5500 (Annual return)
• Authorize distribution/loans
• Select and monitor service providers
• Ensure plan expenses are reasonable
2
, 3(21) - ANSWER 3(21): - Represents or acknowledges fiduciary status
Renders the advice pursuant to a written or verbal
agreement, arrangement, or understanding that the
advice is based on the particular investment needs
of the advice recipient, or
Directs the advice to a specific advice recipient(s)
regarding the advisability of a particular investment
or management decision
Usually advises plan sponsor or investment
committee, but does not make decisions alone
3(38) - ANSWER 3(38):Has authority to make all investment changes
Discretion to manage, buy, or sell plan assets
(pooled accounts)
Manager of "managed accounts"
Broker/dealers and brokers cannot be an
Investment Manager
Identify ministerial functions performed by non-fiduciary service providers - ANSWER •
Not exercising any discretionary control
• Ministerial in nature
• Day-to-day job of administering the plan
• Eligibility
• Calculation of benefits
• Preparing Form 5500
Identify required and additional documentation for maintaining plan records according to
fiduciary best practice - ANSWER Required: • Current, SIGNED plan
3
