The answer may vary depending on the plan provider and the provisions of the plan document. For questions relating to a specific issue, the employer should consult with an ERISA attorney, who will be able to make an appropriate recommendation. An ERISA attorney may consider past cases involving retirement plans, such as the notorious one involving Enron, when making a determination.
Who's the Owner?
More specifically, it depends on whether you are the business owner. If you are not the owner of the business and you are asking from the perspective of an employee, the choice of trustee would not usually affect the end result of your transactions.
If you are the owner of a business that is the trustee, then all the functions and powers of the trustee are the responsibility of the company. Your firm may need to assess the qualifications of its staff to determine if they are qualified to handle the duties of a trusteeship. If they are not qualified, the company may have to ensure the staff receive adequate and ongoing training or hire employees who are already qualified. Fiduciary responsibility is a serious business, and a fiduciary cannot plead ignorance, as ignorance is no excuse for negligence.
If the plan provider is the trustee, the employer and the plan provider would determine if the plan provider is a directed or discretionary trustee. As a discretionary trustee, the plan provider would have fiduciary responsibility for plan investments and also assume the duties of a directed trustee.
If the plan provider is a directed trustee, the plan provider is allowed to perform the functions of a trustee without receiving direction from the employer. A directed trustee's liability is generally limited to determining the employer's instructions are in good order as determined by the plan and the governing regulations.
An employer who does not have the staff necessary to carry out the responsibilities of the trustee may find it beneficial to use the plan provider or another party as the plan trustee. An employer who has adequate staff may want to conduct an analysis to determine if it is more cost-effective to farm out the trustee responsibilities.
An employer who chooses to make the plan provider the trustee should make periodic checks to ensure the plan provider's staff is adequately trained to handle any and all trustee duties assigned to them.