In my research for International Foundation member requests, I noticed an uptick in questions about professional trustees and their fiduciary roles. Here’s an overview of a professional trustee’s role on a multiemployer plan board of trustees.

Definition

A professional trustee is a person who is:

• Well-versed in employee benefits
• Knowledgeable about the industry in which the multiemployer plan exists
• Not connected with the unions or employers who maintain the plan
• Hired to bring experience and expertise to the board of trustees in much the same manner as when the trustees hire lawyers, investment managers and accountants
• Held to the same fiduciary standards as all other plan trustees.

Multiemployer Governance

A board of trustees with an equal number of representatives from labor and management governs a multiemployer plan. Generally, the union appoints labor trustees and the employer association or, collectively, the employers appoint the management trustees.

The trust agreement for each multiemployer plan determines:

• The ability to appoint an individual as a professional trustee
• How many trustees will govern the plan
• How trustees are appointed.

[Related: Advanced Trustees and Administrators Institute, February 12-14, Disney’s Contemporary Resort, Lake Buena Vista, Florida]

Variety of Roles

Professional trustees may be:

• Hired on an ongoing basis and designated as either union, management or independent, or
• Hired for a fixed time period and designated as neutral trustees or independent fiduciaries to help decide a specific issue that trustees cannot resolve due to conflicts of interest, deadlock or inexperience.

Fiduciary Conduct

Professional trustees hold the same fiduciary responsibilities as any other trustee. All trustees have a fiduciary responsibility to the plan and its participants and beneficiaries to act in their best interests. The entity that appointed the professional trustee should regularly review the trustee’s performance.

Who Pays and How?

The professional trustee will charge for his or her services. William K. Ecklund’s article in Benefits Magazine explains, “Assuming that the professional trustee is not already a full-time employee of a contributing employer or the sponsoring union, the trustee’s compensation and expenses can be paid from the trust or the sponsoring entity appointing the trustee. Generally, a professional trustee appointed to serve as either a management trustee or a union trustee would be paid by the entity that appoints him or her. However, the trust fund generally would pay the professional trustee’s expenses, just as any other trustee’s expenses would be paid. An independent fiduciary hired to resolve a specific issue, or a neutral trustee appointed whether for a specific purpose or indefinitely, most likely will be paid by the trust fund.”

What Are Other Plans Doing?

According to Multiemployer Trustee Selection and Orientation: 2014 Survey Results, about one in ten boards (8.7%), unions (12%) and employer/management associations (10.2%) uses professional trustees. Among those using professional trustees, the average number of professional labor trustees is 2.6, while the average number of professional management trustees is 2.3. Compared with U.S. survey results, Canadian boards are less likely to use professional and alternate trustees.

Jenny Lucey, CEBS
Manager, Reference/Research Services at the International Foundation