Fiduciary Requirements

Generally, when you set up a pension plan, the people who manage the pension assets (including you, if applicable) are fiduciaries and are subject to a standard of conduct appropriate to fiduciaries. This means that they may be held legally responsible to plan participants for losses to the plan.

The Department of Labor, however, has taken the position that a plan that covers only self-employed persons, and does not cover any common-law employees, is not subject to the fiduciary standards.

A broker invests the funds in a Keogh account unwisely, and a loss occurs. Since the account was for the sole benefit of a self-employed physician, the broker is not subject to ERISA's fiduciary responsibilities and is not liable to the doctor for the losses. (However, the broker could be liable under the other rules, including SEC regulations, that govern the actions of brokers and other investment advisors.)