Yes. A business owner can serve as trustee of the company’s 401(k) plan, and the same person is allowed to hold the trustee role and the plan administrator role at once.
A plan covering only an owner, or an owner and their spouse, sits outside ERISA, the federal law that governs workplace retirement plans. A plan covering even one employee sits fully inside it.
The trustee role carries personal liability. A trustee who mishandles plan money must make the plan whole out of their own assets, not the company’s.
Naming a bank or trust company as trustee moves the asset duties to that institution. The duty to choose it carefully and keep reviewing it stays with the owner and never transfers.
Why This Matters
Every 401(k) plan must keep its money in a trust, and every trust must have at least one trustee. When a company starts a plan, someone has to sign as that trustee, and when the owner is the one making the decisions that signature line ends up in front of the owner.
The trustee is the person with legal authority over every dollar in the plan, and the law holds that person personally responsible for handling it properly. That is worth understanding before the signature, not after.
The question in the title has a short answer and a longer one. The short answer is yes. The longer answer depends on one fact about your company: whether the plan covers anyone besides you.
The rest of this post walks through both answers. And if you want the full picture in one place, our Fiduciary Role Comparison Guide maps every plan duty against each role, shows which duties move and which stay with you, and includes a worksheet for writing down who holds each one in your own plan today.
Comparison Guide
Fiduciary Role Comparison Guide
Understanding the practical differences between a Discretionary Trustee, 3(16), 3(21), Directed Trustee and 3(38) fiduciary roles
Yes. The IRS names the business owner first in its own list of who can serve: the trustee might be the business owner, an employee, or a financial or trust institution. Federal law adds that one person can wear more than one hat, so the owner who signs as trustee can also serve as the plan’s administrator. The administrator is the person responsible for running the plan itself: following the plan document, handling the required government filings, and getting participants the notices the law requires.
The trustee controls the money. The administrator runs the plan.
If your plan covers only you, or only you and your spouse, that yes is generally the whole answer. A plan with no employees is not governed by ERISA, and the duties, the personal liability, and the bond described in the rest of this post all come from ERISA.
If your plan covers employees, keep reading, because the same yes comes with a different job attached.
What Changes When the Plan Covers Employees?
The first employee who joins the plan brings ERISA with them. From that point the plan is covered by the full set of federal rules, and the trustee has final control over the plan’s money and final responsibility for it.
In practice, the trustee is responsible for three kinds of work:
Collecting the money. The money employees set aside from their paychecks has to reach the trust promptly, and making sure it gets there is part of the role. For an owner who is both the employer sending the money and the trustee receiving it, that responsibility sits entirely on one desk.
Holding the money. Plan assets sit in the trust under the trustee’s control, separate from company money, and the trustee answers for their safekeeping.
Watching the money. The trustee has to manage the plan’s money carefully, and every decision about that money has to serve the people in the plan. Not the owner, and not the company. For an owner whose company and plan finances sit one drawer apart, keeping those decisions separate takes deliberate attention.
None of this means an owner shouldn't take the role. It means being trustee is an ongoing job with real duties, not a one-time signature on the plan paperwork.
What Do You Personally Take on as Trustee?
Personal liability, in the plainest sense of both words. A trustee who breaches these duties must restore the plan's losses, hand over any profit they personally made by using the plan's money, and a court can remove them from the role. That obligation belongs to the trustee personally.
A natural next question: does the LLC or corporation protect you here? It does not. If you formed the company partly to keep business liabilities away from your personal assets, understand that you hold the trustee role as an individual, not as the company, so that protection does not apply to this role.
Two practical consequences follow.
First, anyone who handles plan money, including an owner serving as trustee, generally must be covered by a fidelity bond sized to the money they handle. The bond protects the plan against fraud or dishonesty.
Second, intent does not matter. A trustee who was simply too busy to move the employee deferrals into the trust on time has still broken the rules, and still has to fix it.
The law allows the trustee’s authority to be moved. A plan can name a bank or trust company as trustee, and when it does, responsibility for holding, collecting, and managing the plan’s assets moves to that institution, which becomes legally responsible for them.
Two things change and one does not.
What changes: the asset duties leave your desk, and the bond question largely goes away, because banks and trust companies that meet federal standards do not need the bond that individual trustees do.
What does not change: you chose the trustee, and choosing carefully and reviewing that choice on a regular schedule is a duty you keep forever. An owner who names a corporate trustee has traded the job of running the trust for the smaller job of overseeing one provider.
Corporate trustees come in more than one kind, and the kind you hire decides how many of these duties actually move off your desk. A discretionary trustee can take the whole list, while a 3(38) investment manager covers only the investment decisions.
Where This Leaves You
If you are the trustee of your company’s plan, three documents show how the role is set up. The trust agreement names the trustee. The plan document names who is responsible for running the plan. And the fidelity bond covers the people who handle the plan’s money.
Pull all three. If one is missing, or one still names someone who left the company years ago, fix that first. The documents that define the trustee role should match who actually holds it today.
Our Fiduciary Role Comparison Guide maps every plan duty against each role, shows which duties move and which stay with you, and includes a worksheet for writing down who holds each one in your own plan today. If you would like to walk through your own plan’s setup, get in touch with us or call us at (206) 625-1800.
Comparison Guide
Fiduciary Role Comparison Guide
Understanding the practical differences between a Discretionary Trustee, 3(16), 3(21), Directed Trustee and 3(38) fiduciary roles.
Yes. Federal law allows one person to hold more than one of these roles for the same plan, including both trustee and administrator. The plan’s documents just need to provide for it.
Anyone who handles plan money generally must be covered by a fidelity bond sized to the money they handle, and serving as trustee of your own company’s plan does not create an exception. The bond protects the plan, not the trustee.
No. It moves the asset duties to the bank and leaves you with one duty that never transfers: choosing that trustee carefully and reviewing the choice on a regular schedule.
29 U.S. Code § 1103, Establishment of trust, at law.cornell.edu/uscode/text/29/1103
IRS, 401(k) Resource Guide, Plan Sponsors, Starting Up Your Plan, at irs.gov
U.S. Department of Labor, Meeting Your Fiduciary Responsibilities, at dol.gov
Important Disclosures
First Hill Trust Company is a Washington State-chartered trust company. Investment advisory services are provided by BAC Capital Advisors, an SEC-registered investment adviser and a wholly owned subsidiary of First Hill Trust Company. Registration does not imply a certain level of skill or training. This article is educational. Neither First Hill Trust Company nor BAC Capital Advisors is acting as ERISA counsel or tax counsel to any plan or plan sponsor, and nothing here replaces advice from qualified counsel about your own plan.
Accuracy and currency of information. The statutory provisions and regulatory descriptions in this article were verified against the cited primary sources as of the date of publication. Regulations and guidance change. Readers should confirm current requirements with qualified counsel.
Educational purpose only. Provided by First Hill Trust Company for general informational and educational purposes only. It is not legal, tax, accounting, investment, or fiduciary advice, does not constitute a recommendation regarding any plan, investment, strategy, or course of action, and does not consider any recipient’s specific circumstances. Consult your own qualified advisors before acting.
No offer, agreement, or commitment. Nothing in this material constitutes an offer, solicitation, agreement, or commitment to provide any particular service or to assume any particular responsibility. Descriptions of what a trustee, administrator, adviser, committee, employer, or other party “may” or “can” do are illustrative of how such arrangements commonly work and do not describe the terms of any specific engagement. The actual services provided, the allocation of responsibilities, the scope of any delegation, and the duties of any party are governed solely by the applicable plan documents, trust agreement, advisory agreement, and written service agreements. In the event of any inconsistency, those documents control.
Services and regulatory status. First Hill Trust Company and its affiliates offer retirement plan services, recordkeeping and administrative services, trust and fiduciary services, investment advisory services, and group benefits services, in each case subject to applicable regulatory requirements and the terms of the relevant agreements. Not all services are offered to all clients, in all states, or in all circumstances. Investment advisory services are offered through an affiliated investment adviser; a copy of its Form ADV Part 2A is available upon request. Insurance and group benefits products are offered through appropriately licensed entities. The availability and scope of any service depend on eligibility and the applicable agreements.
Fiduciary status under ERISA. Fiduciary status under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), is determined based on the functions performed and the authority exercised, not on titles or labels. Whether any particular party is acting as a fiduciary, and the scope of any related duties or potential liability, depends on the facts and circumstances specific to the plan and the relationship. Engaging a trustee, adviser, or other service provider does not eliminate a plan sponsor’s or committee’s own fiduciary responsibilities, including the duties to prudently select and monitor any party to whom responsibilities are delegated.
Affiliated entities and conflicts of interest. First Hill Trust Company is affiliated with other entities, including an affiliated investment adviser and entities providing administrative, trust, or other services. These relationships may create conflicts of interest, including where an affiliate is engaged or compensated in connection with a plan. Such conflicts and compensation are described in the applicable service agreements and the affiliated adviser’s Form ADV Part 2A; fiduciaries should consider them when evaluating any engagement.
Statutory and regulatory references. References to ERISA, the Internal Revenue Code, and related statutory or regulatory provisions are general summaries only. They are not a substitute for review of the actual statutory text, regulations, or guidance from the Department of Labor, Internal Revenue Service, or other relevant authorities, and they do not address how those provisions may apply to any particular plan, sponsor, fiduciary, or individual. Laws, regulations, and guidance are subject to change and to interpretation by the relevant agencies and courts. Examples, categories, and situations described are simplified for illustration and may not reflect the requirements or circumstances of any particular plan or person.
No guarantee of results; investment risk. References to governance, fiduciary practices, risk reduction, or outcomes describe common industry approaches and potential benefits, not promises or guarantees of any result, of compliance, or of protection from liability, loss, or claims. All investing involves risk, including possible loss of principal; diversification does not ensure a profit or protect against loss. Past performance does not guarantee future results. For more information, contact First Hill Trust Company at (206) 625-1800.
A 3(38) investment manager covers two of a 401(k) plan's six fiduciary responsibilities. A discretionary trustee can take all six. This post maps each role against the full list.
