When Fidelity restricted third-party advisor access to employee retirement accounts in late 2024, citing cybersecurity concerns, the move caught plan sponsors off guard. The nation’s largest 401(k) provider had made a unilateral decision that directly affected how participants could work with their chosen financial advisors. Charles Schwab soon followed.
Now HR leaders face a critical question: Who bears the fiduciary liability when recordkeepers impose restrictions that employers never authorized?
According to Lisa Gomez, former assistant secretary of labor for EBSA at the U.S. Department of Labor and advisor to retirement fintech Pontera, a new tension may exist between employers’ fiduciary duty under ERISA and unilateral actions by plan providers. She says when recordkeepers restrict how participants can work with independent advisors, it may shift responsibility onto employers in ways they did not anticipate.
This isn’t about one retirement company, but about the precedent it sets: If a plan provider can limit the advice pathways available to participants today, what prevents them from taking broader actions tomorrow without plan sponsor input?
The fiduciary risks of unilateral restrictions
“While plan fiduciaries should expect that recordkeepers will provide both plan sponsor and plan participant services in accordance with the law, the terms of their contract and the plan’s provisions, those expectations are not a handoff of accountability,” Gomez says.
“Fiduciaries are ultimately responsible for choosing and monitoring the recordkeeper’s conduct and intervening when their plan service provider actions affect personal financial advisors’ access, participant access or have the potential to impact the financial outcomes for the employees in the plan.”
“ERISA is built on the premise that plan sponsors and plan fiduciaries, not their plan service providers, set the rules governing plan administration and participant engagement,” she says. “That concern is heightened where restrictions are imposed in a way that either benefits the recordkeeper or advances its own business interests.”
Even if the employer did not authorize the restriction, participants will still view the employer as the “face of the plan,” Gomez notes. Once plan sponsors learn their service provider has imposed barriers affecting participant access, they should investigate and determine what action to take.
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Questions to ask your retirement recordkeeper
Plan sponsors are obligated to monitor their selected providers, Gomez says. Among the questions HR leaders should be asking:
- If a participant selects a third-party financial professional, do you impose any online restrictions or conditions on that access? What authority do you have under the law or our contract to impose them?
- What policies or risk considerations trigger those restrictions? Were these decisions reviewed by outside ERISA counsel?
- What are the implications of the recordkeeper effectively limiting access to advisory services and making the plan responsible for participants’ selection of an investment adviser?
That last question is critical, Gomez says, because the DOL has already stated that a plan is not responsible for third-party advisers if it does not select or endorse them. She indicates that if the recordkeeper has unilaterally decided that the plan sponsor is responsible for participants’ third-party advice, they’ve effectively dismantled the protection that DOL provides.
Where liability falls
“Liability often turns on what the sponsor knew, or should have known, and how it responded once the issue surfaced,” Gomez says. A sponsor who documents that it promptly investigated and evaluated whether the provider’s actions were consistent with ERISA is in a very different position than one who remains passive.
“Inaction after notice can be considered acquiescence and implicit consent, even when the initial decision was not the sponsor’s,” she warns.
Contractual protections to negotiate now
Many recordkeeping contracts haven’t kept up with how participants select third-party tools to assist with retirement decisions, Gomez notes. Sponsors should review retirement plan contracts to ensure there are clear limits on unilateral provider actions, advance notice of material policy changes and transparency around access restrictions.
“These provisions are about understanding what the recordkeeper is doing and preserving fiduciary authority where ERISA places it,” she says.
“If employers and plan sponsors don’t ask questions and establish appropriate boundaries, provider actions can expose employers, sponsors and fiduciaries to liability risk they didn’t anticipate,” Gomez warns. “Strong governance today is not about resisting innovation; it is about ensuring innovation operates within the structure and accountability framework of ERISA.”
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