T
he retirement plan world has plenty of fiduciary myths floating around.
Some are outdated. Some are oversimplified. Some have been corrected a hundred times. Yet, somehow, they keep showing up like flies at a picnic.
To wrap up this series about fiduciary responsibility, I offer the following seven myths that really need to be retired.
Myth #1: Poor investment performance automatically means a fiduciary breach
False – a lousy return alone does not tell the whole story.
Fiduciary prudence is about process. It is not about guaranteeing that every fund outperforms every benchmark in every time period. Markets move. Funds have cycles. What matters is whether the plan has a prudent, documented process for reviewing investments and making decisions.
Myth #2: Hiring an advisor removes the plan sponsor’s responsibility
False – while delegation is helpful, abdication is not a viable strategy.
Hiring an advisor can absolutely help. In many cases, it is a very smart move. But it does not make the plan sponsor disappear from the fiduciary picture. Sponsors still have oversight responsibilities. They need to understand who is doing what, monitor the advisor, and make sure the arrangement continues to serve the plan well.
Myth #3: Small plans do not need formal governance
False – a small plan may have a simpler process, but “simple” and “nonexistent” are not the same thing.
Small plans may not need a giant committee, binders full of procedures, or meetings that could have been emails. But they still need governance. That means having a real process for reviewing fees, monitoring service providers, overseeing plan operations, and documenting key decisions.
Myth #4: Fiduciary responsibility only applies to investments
False – while the investment lineup may get the spotlight, the rest of the plan still needs adult supervision.
Investments are a big part of the conversation, but they are not the whole conversation. Fiduciary oversight can also involve fees, service providers, plan administration, participant notices, payroll accuracy, eligibility, distributions, and operational compliance.
Myth #5: If no one has complained, the plan is probably fine
False – this is a dangerous assumption.
Plan problems often occur long before a participant complaint ever appears. Sometimes participants do not know there is an issue. Sometimes they assume the issue is normal. Sometimes the issue is buried in the operation of the plan and has nothing to do with participant feedback at all.
Silence is not a substitute for a compliance review.
Myth #6: Only people named in the plan document can be fiduciaries
False – titles matter less than actions.
A person can become a fiduciary based on what they actually do, not just what their title says. If someone exercises discretion or control over plan management, plan assets, or certain plan decisions, they may have fiduciary responsibility whether or not their name appears in the plan document.
Myth #7: Documentation is optional if the process was reasonable
False – if it isn’t written down, it didn’t happen.
A good process is important. But documentation is what helps prove the process happened.
If a fiduciary decision is ever questioned, “we talked about it” is not nearly as helpful as minutes, reports, notes, benchmarking, committee materials, and clear records of the decision-making process.
Why these myths matter
These misconceptions create a false sense of security which is definitely not a good fiduciary strategy.
The good news is that fiduciary responsibility becomes much more manageable once plan sponsors stop thinking of it like an abstract legal concept and start thinking of it like a continuous process – clear roles, better questions, regular review and strong documentation.
While unlikely to steal the spotlight at the company picnic, retiring these myths makes fiduciary responsibility much easier to understand and much more useful.
