What is a Retirement Plan Trustee?

Having a trustee is a legal requirement for 401(k) plans, ensuring proper administration and protection of plan assets. The trustee's role is fundamental to the operation and integrity of the plan, providing confidence to both plan participants and sponsors that the plan is managed effectively and responsibly. 

"Trustee" means the person or persons designated by the Plan Sponsor in a separate trust agreement to
serve as the Trustee to the extent the assets of the Plan are not held solely by an insurance company.

Role and Responsibilities of a Trustee
Fiduciary Duty: The trustee has a legal obligation to act in the best interest of the plan participants and beneficiaries. This includes making prudent investment decisions and ensuring compliance with the Employee Retirement Income Security Act (ERISA). 

Asset Management: Trustees are responsible for holding and investing the plan's assets. They must ensure that these assets are managed according to the plan's guidelines and federal regulations. 

Compliance Oversight: Trustees must ensure that the 401(k) plan adheres to all legal and regulatory requirements. This includes timely deposits of contributions and avoiding prohibited transactions. 

Decision-Making: Trustees make critical decisions regarding investment options, asset allocation, and the selection of service providers. They must act with the care, skill, and diligence that a knowledgeable person would use under similar circumstances. 

Record Keeping: Trustees are responsible for maintaining accurate records of plan assets and providing regular accounting to participants. This includes annual valuations of the plan's assets. 

Who Can Be a Trustee?
Individuals: This can include company owners or officers who are directly involved in the management of the plan. 

Entities: Financial institutions, banks, or trust companies can serve as trustees, providing expertise in managing the plan's assets. 

Investment Committees: Larger organizations may establish committees composed of employees and external advisors to oversee the plan's investments. 

Not Allowed: 
Foreign Parties: ERISA 404(b) provides "no fiduciary may maintain the indicia of ownership of any assets of a plan outside the jurisdiction of the district courts of the United States." DOL Regulation 2550.404b-1 describes the exceptions to this rule, including a special Canadian exemption. In addition, the Code has limitations on foreign persons serving as trustees. (See Treas. Reg. section 301.7701-7.)