Some service providers in the benefits industry like to sell clients on the following claims: “we will run your plan for you and you will not have to worry about a thing, and we will hold all the liability for the plan to keep you safe.”
Both of these claims are false!!!
As an employer and plan sponsor, some services can be delegated, but a modicum of responsibility remains with you. Furthermore, and most importantly, the employer is always liable to the plan as a fiduciary, no matter what. Fiduciary liability itself cannot be delegated or contracted away, and any claims to the contrary are false and dangerous to your business. The Department of Labor has even regulated that employers are fiduciaries of participant-directed 401(k)s, where the employer is not even charged with selecting how participants invest, only what options are available. See 29 CFR § 2550.404c-1.
Case Examples: See Smith vs. Stockwell Construction Co. (WDNY 2011). In Smith, the TPA (third-party administrator) was released as a defendant to the lawsuit, but the ownership remained as plan administrator and trustee of the plan, as follows:
“A closer question is whether suit may be brought against TPSI as a third party administrator. Courts have determined that when the plan administrator retains discretion to decide disputes, a third party service provider . . . is not a fiduciary of the plan, and thus not amenable to a suit under § 1132(a)(1)(B)." (citation omitted)"… Accordingly, TPSI is not a proper defendant to Plaintiff's claims…”