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Shouldering Your Plan Responsibilities: 3(38) Investment Fiduciaries

Qualified retirement plans, like 401(k)s, are unfamiliar territory to many, or even most, businesses. But they are an increasingly important method for those businesses to attract and retain talented employees. That means, it’s important for plan sponsors to understand the basic elements of qualified plans.

The Employment Retirement Income Security Act of 1974 (ERISA) is the main law that governs employee benefit plans, like 401(k) plans. Section 3 of ERISA defines the terminology used by ERISA, including the 21st definition, fiduciary. “Fiduciary” is a very broad term that encompasses a wide range of roles. In general, a fiduciary is anyone who makes decisions about managing the retirement plan or its investments, anyone who makes decisions about administering the plan, and anyone who is paid to provide investment advice to the plan. As a plan sponsor, you are a plan fiduciary, and while you can delegate some of your responsibilities to other fiduciaries, you can’t delegate all of your responsibilities.

Who Can Help?

So who can help you with your fiduciary duties? A more specific term that’s defined by ERISA is “investment manager,” which is the 38th definition provided by ERISA. A 3(38) investment manager is a special type of fiduciary that’s been appointed by the plan sponsor to have full discretionary authority over investment decisions, and can select, remove, and replace the plan’s investment options. A 3(38) manager must be a registered investment advisor, a bank, or an insurance company, and has accepted fiduciary responsibility in writing.

Once appointed, a 3(38) investment manager has full fiduciary responsibility for the plan’s investment decision, subject to the plan’s documents and policies. The plan sponsor and any other plan fiduciaries no longer have fiduciary responsibility for the plan’s investment decisions.

It’s important for plan sponsors to remember they can never completely eliminate their fiduciary duties. Even with a 3(38) fiduciary in place, the plan sponsors are still responsible for monitoring the investment manager and making sure the manager is performing appropriately.

Talk to FiduciaryFirst

In effect, a 3(38) investment manager provides an extra layer of risk management for plan sponsors, particularly if they aren’t comfortable making investment decisions. When businesses move into unfamiliar territory, they often look for partners that have the expertise the business needs to pursue success. FiduciaryFirst can be the 3(38) fiduciary partner your company needs to make your qualified plan successful. Contact us today to find our more.

Contact Details

1060 Maitland Center Commons

Suite 360

Maitland, FL 32751

Phone: 866-625-4611

Fax: 407-740-6113



Retirement Plan Consulting Program and other advisory services offered through LPL Financial, a registered investment advisor.

This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice.  Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.  In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.


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