Fiduciary Responsibilities | Meaden & Moore

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.

ESOP Blog Series

Explore the full ESOP Blog Series to deepen your understanding of employee ownership:

1. Understanding ESOP Governance Fundamentals - Roles, oversight, and accountability for a well-managed ESOP.

2. Fiduciary Responsibilities – What Every Participant Should Know – Learn how fiduciary duties protect the plan and participants.

3. Best Practices for Structuring an ESOP-Owned Company – Administrative and communication strategies for long-term success. (Coming Soon)

4. Building and Aligning ESOP Culture with Company Strategy – How to connect ownership culture with business goals. (Coming Soon)

Stay tuned for more insights on fostering strong governance, culture, and compliance in your ESOP.