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Fiduciary Responsibilities (or Lack Thereof) in Non-ERISA plans

This article originally ran on September 8, 2014.

By Michael A. Webb, TGPC, AIF™, CEBS, Co- Chair, NTSA Education Committee

(Ed. Note: We have reports that, in most states, statute does not apply fiduciary obligations to the 403(b) plans sponsored by public education employers; however, we do not know if that is not true in all states. Thus, plans sponsors and their benefits counsel should be familiar with the laws in their own state, as Mike Webb so clearly points out.)

Despite past articles on the topic, the degree of fiduciary responsibility for non-ERISA plans, such as those sponsored by public education and religious organizations, continue to generate many questions from plan sponsors and the advisers that serve them. This is understandable, given the fact that, unlike ERISA plans there is no clear uniform set of fiduciary standards that apply to each sponsor. Instead, it is often a guessing game as to whether various state laws apply to retirement plan fiduciary conduct. Depending on the state, or even on the type of organization within a state, fiduciary responsibility can be a) nonexistent b) comprehensive, or c) somewhere in between. In this article, we will attempt to assist plan sponsors and those who work with them in determining what fiduciary responsibility, if any, they have. 

Is There a Fiduciary Law that Applies to My Plan? 

Unfortunately, with the exception of elective deferral-only plans of private tax-exempts where exercising any fiduciary responsibility would subject the plan to ERISA, this is not an easy question! The best way to approach the question is first to understand where you CANNOT find fiduciary law that applies to your plan, since there is a lot of misinformation  (spread mostly by third parties who do not understand  the unique regulatory framework of non-ERISA plans). Where one can most certainly NOT find applicable law is in the following: 

  • ERISA — since the plans in question are not subject to ERISA, not one word of the detailed regulations regarding fiduciary conduct and process applies to non-ERISA plans. This is not to say that elements of these rules COULD apply if applicable state law simply replicates ERISA language, but ERISA does not directly apply. 
  • The 403(b) Final Regulations — Repeat after me: “No matter what I have read or what individual or entity says that would lead me to believe that the 403(b) final regulations state fiduciary responsibilities it is 100% untrue. 100 percent.” If anyone attempts to convince you otherwise, ask him/her to show you where the word “fiduciary” appears in the 403(b) final regulations (hint: it is not a trick question). 
The reason for the lack of fiduciary language in the 403(b) final regulations is a simple one: the IRS is concerned with compliance with the Internal Revenue Code and related regulations, not fiduciary responsibility. They leave fiduciary matters to the Department of Labor (DOL), and non-ERISA plans are not subject to the DOL’s rules (see ERISA, above). Many have made the argument that, in order to comply with various provisions of the final regulations, practices similar to those adopted by ERISA fiduciaries to address plan compliance issues may need to be adopted, but that is entirely different from saying that the 403(b) final regulations dictate fiduciary responsibilities. 

OK, so now that we know where we cannot locate fiduciary law that applies to non-ERISA plans, where can we find such law? The short answer is “state law,” but, as is readily apparent to anyone who has attempted to read and understand state statutes, determining the specific laws applicable to non-ERISA retirement plans is a job best left to benefit attorneys with specific expertise in this area. The primary reasons for this is that state law:

is not page-turning reading, even compared to the Code and ERISA 
often is written in a fashion which leaves it open to debate regarding applicability to specific situations, such as plan sponsor conduct regarding retirement plans. 

Finally, multiple sections of state law may apply, but can also conflict with each other! The sections of state law that most commonly apply are:

  • The statute that enable eligible entities to sponsor 403(b)/401(a)/457(b) retirement plans
  • The statutes that governs the state retirement system (though this often carves out 403(b) etc. plans)
  • Trust law (but, 403(b) assets are not required to be held in trust, and most often are not held in trust.)
  • Contract law
  • Agency law
Advisor Practice Pointer: advisors who work with benefits attorneys to gain an understanding of the fiduciary regulations in the states in which they do business will be well positioned to dispel misinformation provided by others with less knowledge to their plan sponsor clients. 

It should be noted that there has been an effort to standardize state law in this regard, known as the Uniform Management of Public Employee State Retirement Systems Act (UMPERSA). However, only two states — Maryland and Wyoming — have adopted it. There are other uniform laws that a greater number of states have adopted related to fiduciary conduct (e.g. the Uniform Prudent Investor Act), but applicability to retirement plans is uncertain. Lacking a uniform standard, plans with employees/retirees in multiple states may be required to follow the laws of multiple states, which may conflict with each other! 

Other Considerations

If you are a religious organization, it is possible that you may be exempt from any state law that would apply to fiduciary conduct, and, at a minimum, state law that applies to governmental entities. However, many feel a moral obligation to adopt high standards in ensuring that they are acting in the best interests of plan participants. As such, religious organizations often decide to adopt ERISA-like best practices and operate their plans in a prudent fashion, regardless of the lack of a federal mandate to do so.

If not otherwise prohibited by state statute, some public education employers, especially those with dedicated human resource/benefits departments such as public universities may wish to adopt ERISA-like best practices as well. Also, the provider relationship may come into play regarding best practices as well, especially in the area of fee disclosure, where some providers have been reluctant to withhold from non-ERISA plan sponsors the fee information they are now required to provide their ERISA clients. By contrast, K-14 school districts without a state law mandate to implement fiduciary practices may lack the resources to adhere voluntarily to such practices, even if they thought it would be prudent to do so. 


The prospect of uniformity of the laws that apply to fiduciary conduct in non-ERISA retirement plans does not appear to be minimal, at least in the near future. Thus, non-ERISA plan sponsors should continue to work closely with benefits counsel well-versed in such matters to determine what fiduciary process, if any, they should implement in order to comply with applicable state law. 

Michael Webb is the NTSA Education Committee Co-Chair and a Vice President at Cammack Retirement. 

Cammack Retirement is an independent retirement plan consulting firm specializing in non-profit industries. Offering tailored, actionable solutions, to help clients achieve the greatest return on their employee investment, Cammack Retirement delivers end-to-end solutions for complex retirement plan challenges.
Please note that this article is for general informational purposes only, is not intended to be taken as legal advice or a recommended course of action in any given situation. Readers should consult their own legal advisor before taking any actions suggested in this article.