What must the investment manager be to act as a fiduciary under ERISA?

To act as a fiduciary under the Employee Retirement Income Security Act (ERISA), the investment manager must be a qualified bank or insurance company. This requirement stems from the need to ensure that fiduciaries possess the appropriate level of expertise, regulatory oversight, and capacity to manage assets prudently and in the best interest of the plan participants and beneficiaries.

Qualified banks and insurance companies are subject to significant regulatory frameworks that enforce rigorous standards of financial responsibility and investment practice. This regulatory oversight helps to protect the interests of retirement plan participants. Such entities also typically have the necessary infrastructure and resources to manage investments effectively, making them suitable fiduciaries under ERISA.

While individuals or entities may be designated by the plan sponsor to manage investments, mere designation does not guarantee the requisite qualifications or adherence to fiduciary standards that a qualified bank or insurance company would possess. Other choices, such as being a licensed broker or certified by the SEC, do not fulfill the specific ERISA definition of fiduciary responsibility.