Successor fiduciary duties after a predecessor's breach

P/OPINION 76-95
409
514✓

September 30, 1976
Dear          :

This is in response to your letter of November 4, 1975 concerning
the applicability of section 409(b) of the Employee Retirement
Income Security Act of 1974 (the Act). Your letter apparently
raises the question whether section 409(b) is intended to
exonerate successor fiduciaries from liability for the acts
of their predecessors which occurred prior to the passage
of the Act.

In this regard, it is represented in your letter that there
is a position of the Office of the Deputy Comptroller of
the Currency for Trusts "with respect to documentation of a
successor fiduciary showing either that the accounts of a
predecessor fiduciary have been approved by a court having
jurisdiction or that such accounts have been reviewed by the
successor and found to be satisfactory". Your letter questions
whether section 409(b) exonerates successor fiduciaries from
this requirement.

As a general matter, it is the policy of the Labor Department
not to respond substantively to hypothetical questions. The
following information may, however, be helpful to you.

Section 409(b) of the Act provides that no fiduciary shall
be liable with respect to a breach of fiduciary duty under
Title I of the Act, if such breach was committed before he
became a fiduciary or after he ceased to be a fiduciary.
Section 409(b) does not, however, exempt a fiduciary from
carrying out his responsibilities to a plan imposed by
various provisions of Part 4 of Title I of the Act. For
example, although a fiduciary may not be liable under section
409 of the Act for the acts of predecessor fiduciaries, if he
knows of a breach of fiduciary responsibility committed by a
predecessor fiduciary he would be obligated to take whatever
action is reasonable and appropriate under the circumstances
to remedy such breach. Failure to take such action would
constitute a separate breach of fiduciary responsibility
by the successor fiduciary.

With regard to the position taken by the Office of the Deputy
Comptroller of the Currency for Trusts, your attention is
directed to section 514(d) of the Act which provides, as
here relevant, that nothing in Title I of the Act shall be
construed to alter, amend, modify, invalidate, impair or
supersede any law of the United States or any rule or regulation
issued under any such law.

I hope that this response will be helpful to you. If you have
any further questions concerning this matter, please contact this
office.

Sincerely,