Fiduciary outsourcing: What liability does the sponsor retain?

How much ERISA fiduciary liability can a plan sponsor/employer avoid or “outsource” using an outsourced CIO approach? This paper addresses that very question.

By Mike Barry

How much ERISA fiduciary liability can be “outsourced?”

In an “ordinary” outsourcing transaction, the basic (substantive) question is: “How much of what I do now can I stop doing after outsourcing is implemented?” In an ERISA fiduciary outsourcing transaction, it’s just as important to ask: “How much of my current ERISA fiduciary liability will I no longer have after outsourcing is implemented?”

In this paper we address that second question – the extent to which fiduciary liability may be “outsourced” (avoided by the employer/plan sponsor) in an outsourcing transaction. We discuss three different approaches:

The “traditional” approach, using plan delegation provisions
Designating the outsourcer as the “named fiduciary” in the plan document
Providing contractual remedies to allocate the “cost” of any fiduciary liability to the outsourcer

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