BUSINESSES

Addressing ERISA Liability

The Employee Retirement Income Security Act (ERISA) governs the retirement plans of profit making enterprises in the United States. ERISA devotes thousands of pages of complicated jargon to describe benefit entitlement rules, but, ironically, it is brilliantly direct about who is responsible for investment losses: ERISA makes Investment Fiduciaries personally liable for investment losses.

An Investment Fiduciary is anyone who has control, or provides advice to those who have control, over investment decisions including the selection of investment managers. Investment Fiduciaries are personally responsible for investment losses. ERISA defines a loss as the difference between what an expert would have earned with plan assets, and what was actually earned by those in charge. Losses, therefore, can be relative rather than nominal.

Fortunately, ERISA relieves plan sponsors of most of this liability if they hire a registered investment advisor to manage their plan, so long as that investment advisor accepts investment fiduciary liability in writing by citing ERISA Sec. 3(38) in their management contract.

TISCH INVESTMENT ADVISORY INCORPORATED IS A REGISTERED INVESTMENT ADVISOR. WE WILL ACCEPT INVESTMENT FIDUCIARY LIABILITY.

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