Investment committee member serving on manager board

P/OPINION 76-15



                                                3(14)(A) ✓
                                                3(2l)(A)
                                                406
                                                408(c)(3)
                   April 26, 1976



Dear          :

This is in response to your letter of October 27, 1975,
addressed to            of this office. In your letter
you inquired whether, under section 408(c)(3) of the
Employee Retirement Income Security Act of 1974 (the Act),
an individual serving as a member of a committee which has
the responsibility for managing plan assets, inc1uding the
responsibility for appointing an investment manager for
the assets of the plan, may continue to serve as a member
of the board of directors of a trust company appointed
by such committee to serve as such an investment manager.
From the facts set forth in your letter, it is clear
that the individuals serving as members of the investment
committee are fiduciaries under section 3(2l(A) of the Act.
An investment manager with authority to manage the assets
of an employee benefit plan is also a fiduciary with respect
to the plan under section 3(2l)(A) of the Act, and, as such,
is also a party in interest with respect to the plan under
section 3(14)(A) of the Act.

Section 408(c)(3) of the Act provides that nothing in section
406 of the Act shall be construed to prohibit any fiduciary from
“serving as a fiduciary in addition to being an officer, employee,
agent, or other representative of a party in interest.”
A person serving as a director of a fiduciary would be deemed
to be a representative of a party in interest within the meaning
of section 408(c)(3). Under section 408(c)(3), therefore,
an individual who is a fiduciary with respect to an employee
benefit plan by virtue of the individual's authority with respect
to the appointment of an investment manager is not subject to
liability under section 406 merely because he continues to serve
as the director of a trust company which has been appointed
as an investment manager to manage assets of such plan.
P/OPINION 76-15


Section 408(c)(3) states merely that service as a
fiduciary by a representative of a party in interest,
without more, is not prohibited under section 406. In
particular, section 408(c)(3) does not deal with possible
prohibited transactions which might occur under section
406(b), depending on the factual situation, when a
fiduciary of a plan is involved in the appointment of a
corporation of which such fiduciary is a director as
an investment manager of the plan's assets.

You should note, moreover, that section 408(c)(3)
of the Act relates only to the construction of section
406 of the Act. In particular, section 408(c)(3) has no
bearing on the applicability of the fiduciary duties
set forth in section 404(a)(l) of the Act.

Because your letter also raises questions under section
4975(d)(11) of the Internal Revenue Code of 1954, we have
conferred with representatives of the Internal Revenue
Service and they concur in the views set forth above
as they apply to such section.

Sincerely,