The Power of a Fiduciary Partner
As a retirement plan sponsor, you have significant responsibilities when it comes to providing retirement benefits to your employees, like ensuring your retirement plan is well-managed and serves the best interests of your workforce. For many, navigating the complexities of fiduciary duties and investment management can be daunting. This is where understanding fiduciary roles can make a world of difference.
Plan sponsors are the highest-level fiduciary and the only ERISA-mandated role for every plan. But while you are responsible for all aspects of your plan’s investments and operations, you can delegate many of your fiduciary duties to an ERISA subsection 3(16) plan administrator. This administrator, in turn, has the ability to appoint all other fiduciary and administrative service providers, such as a subsection 3(38) investment manager, a subsection 3(21) investment advisor, a record keeper, third-party administrator, and custodian.
Both 3(38) investment managers and 3(21) investment advisors are crucial roles in managing retirement plans, but they differ in their levels of discretion and liability. A 3(21) fiduciary, also known as a co-fiduciary, shares fiduciary responsibilities with the plan sponsor. This type of fiduciary provides investment advice and recommendations but does not have the authority to make final decisions regarding plan investments. In contrast, a 3(38) fiduciary assumes full discretion and responsibility for selecting, monitoring, and replacing plan investments. This distinction is vital for plan sponsors to grasp when evaluating their fiduciary options.
A 3(38) fiduciary acts as an investment manager, relieving plan sponsors of the burden of investment selection and monitoring. By taking on this role, a 3(38) fiduciary assumes legal responsibility for the investment decisions within the plan. This includes selecting and monitoring the investment options available to plan participants, as well as making adjustments when necessary to ensure the prudent management of assets. By entrusting investment decisions to a qualified professional, plan sponsors can mitigate their fiduciary risk and help enhance the overall effectiveness of their retirement plan. By working with a 3(38) fiduciary, plan sponsors can focus their attention on other critical aspects of plan administration, such as participant education and engagement.
At Savant, our Retirement Plan Services team understands the challenges that retirement plan sponsors face. Not only can we select and oversee certain plan services providers, including the 3(38) investment manager or 3(21) investment advisor, but we can also perform these services for you, when appropriate. Our team of experienced professionals is dedicated to providing objective, unbiased guidance that serves the best interests of your plan participants.
If you’re a retirement plan sponsor seeking to enhance the management of your plan, we invite you to reach out to us with any questions you may have. Our knowledgeable advisors are here to assist you every step of the way, from evaluating your fiduciary options to implementing an investment strategy that aligns with your goals and objectives. Together, we can help build a retirement plan designed to empower your employees to pursue financial security in retirement.
Patricia L. Hutchinson
Director of Retirement Plan Services
MBA