Fiduciary Responsibilities in
an ESOP: What Every Employee-Owner Should Understand
Being part of an ESOP means being part of something bigger—but it also requires understanding how fiduciary responsibility protects the plan and its participants.
Who Are the Fiduciaries?
Fiduciaries may include:
- ESOP Trustees
- Plan Administrators
- Members of the Board of Directors when making ESOP decisions
Fiduciary Duties Under ERISA
Fiduciaries are legally required to:
- Act in the best interests of plan participants
- Exercise prudence in decision-making
- Diversify plan assets to minimize risk
- Avoid conflicts of interest or self-dealing
- Follow plan documents and maintain compliance with ERISA requirements
Real-World Application
Examples of fiduciary responsibility in action include the selection of third-party advisors, overseeing valuations, ensuring timely communication of distributions, and keeping participant records accurate and up-to-date. Fiduciaries must continually review their processes to ensure they are fulfilling obligations in a consistent and legally sound manner.
Why Participants Should Care
Understanding fiduciary roles empowers participants to:
- Ask informed questions
- Know who is responsible for protecting their interests
- Better appreciate the oversight designed to safeguard their retirement benefit
- Hold decision-makers accountable in a constructive, transparent manner
- Gain confidence in the plan’s integrity and long-term sustainability
Need help explaining fiduciary roles to your employee-owners? Reach out to learn how we help companies foster informed ESOP participation.
