Directed Trustees Can Take Many Roles

Over the years, we have talked to many companies that have directed trustees, usually an outside institution. Directed trustees have very limited fiduciary responsibility. The real fiduciary is the person or body that causes a decision to be made (this could be the board, an ESOP committee that directs the trustee, an officer, etc.). The directed trustee, however, must make sure the directions are consistent with ERISA and the plan document, something that has been narrowly interpreted by courts in the past.

But a directed trustee may actually do a lot of work. For instance, the trustee may carefully review the appraisal and make recommendations directly to both the fiduciary and appraisal firm. The trustee might also provide advice on ongoing administrative issues, sit in on board meetings to discuss plan issues, and advise the fiduciary and/or the board on the propriety of plan policies and changes among other things. None of these actions, in themselves, make the trustee more of a fiduciary, however, at least under current court decisions.