Trustee vs. Authorized Signer: Who Does What in Your Retirement Plan?
When managing a retirement plan, such as a 401(k), it's important to understand the distinct roles involved in overseeing and operating the plan. Two key roles that often get confused are the plan trustee and the authorized signer. While both are essential to the plan's operation, their responsibilities and authority differ significantly.
What is a Plan Trustee?
The plan trustee is a fiduciary who holds legal responsibility for the plan's assets. This role required the trustee to act in the best interest of plan participants and their beneficiaries. Trustees are responsible for making decisions about investments, ensuring the plan complies with regulatory requirements, and safeguarding the plan's assets.
Key Responsibilities of a Plan Trustee:
1. Oversight of Plan Investment: Trustees ensure that investments are appropriate, diversified, and align with the plan's goals.
2. Fiduciary Duty: Trustees must act solely in the interests of participants, avoiding any conflicts of interests.
3. Compliance: Trustees ensure the plan complies with the Employee Retirement Income Security Act (ERISA) and other laws.
4. Asset Custody: Trustees oversee the safekeeping of the plan's funds.
What is an Authorized Signer?
An authorized signer is someone designated to sign documents, such as plan-related agreements, distribution requests, or administrative forms. While an authorized signer plays an operation role, they do not hold the fiduciary responsibility of a trustee.
Key Responsibilities of an Authorized Signer:
1. Administrative Actions: Authorized signers execute day-to-day tasks like signing checks, approving distributions, or authorizing vendor payments.
2. Limited Scope or Authority: Their authority is confined to the actions specified by the plan sponsor, and they don't have decision-making power over plan investments.
3. Non-Fiduciary Role: Unlike a trustee, an authorized signer is not responsible for the overall management or compliance of the plan.
Main Differences Between a Trustee and an Authorized Signer
Aspect | Plan Trustee | Authorized Signer |
Fiduciary Responsibility | Yes, must act in the best interest of participants. | No, acts as directed by the plan sponsor. |
Decision-Making Power | Has authority over investments and plan management. | Limited to executing specific administrative tasks. |
Legal Liability | Bears legal liability for fiduciary decisions. | No legal liability for plan compliance or investments. |
Scope of Role | Broad, encompassing overall plan oversight. | Narrow, focused on administrative duties. |
Why Does This Matter?
Understanding these roles is crucial for ensuring your retirement plan is managed effectively and compliant with applicable laws. Appointing the right individuals to these roles, and understanding the scope of their responsibilities, can help protect the plan sponsor and ensure participants receive the benefits they deserve.
Final Thoughts
While a trustee oversees the plan with fiduciary responsibility, an authorized signer handles administrative tasks without the same level of legal obligation. Clearly defining these roles can improve the efficiency and compliance of your plan operations.
Scott Higgins | AIF ®, CFP®, CPFA®, NSSA®
Financial Advisor
Since 2012 at Rose Street, Scott has been responsible for helping the firm’s individual wealth management clients with income strategies for retirement and consulting with employers with their employee retirement plans. In free time, he enjoys golf, biking, skiing, cooking, and traveling. Fun Fact, Scott has a hobby of filling growlers with coins!
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