The ERISA consultants at the Columbia Management Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. A recent call with a financial advisor in Wisconsin is representative of a common inquiry involving the application of fiduciary standards to retirement plans. The advisor asked:
“Are individuals who are involved with the management of state retirement plans held to a fiduciary standard?”
Highlights of Discussion
Most likely, the answer is yes, to some extent. Although retirement plans maintained by states are exempt from the fiduciary standards that apply to qualified retirement plans as set forth under ERISA, laws enacted at the state level may impose fiduciary standards and codes of ethics to which they must adhere.
For example, according to the State of Wisconsin Department of Employee Trust Funds, any person or entity that exercises discretionary authority over the management of Wisconsin’s employee trust funds or their assets are fiduciaries and will be held to fiduciary standards that virtually mirror those outlined in federal law under ERISA.
In another example, the New York State Common Retirement Fund is subject to “fiduciary and governance responsibilities consistent with the New York State code, rules and regulations regarding ethics provisions, transparency and financial reporting requirements, and financial soundness and actuarial principles …” (Source: Fiduciary and Conflict of Interest Review of the New York State Common Retirement Fund, February, 2013.)
Participants in state retirement plans and their financial advisors should consult their respective state’s government Web sites for details on their specific situations.
Conclusion
While government-sponsored retirement plans are exempt from ERISA, that does not mean that plan officials are automatically exempt from complying with some form of fiduciary standard established under state law and regulation. Financial advisors who are aware of this alternative level of fiduciary responsibility are better positioned to support their clients who are involved with state retirement plans.
The Columbia Management Retirement Learning Center Resource Desk is staffed by the Retirement Learning Center, LLC, a third-party industry consultant that is not affiliated with Columbia Management. For informational purposes only. Please consult a tax advisor or attorney for specific tax or legal needs. © 2013 Columbia Management Investment Advisers, LLC. Used with permission.
