Fiduciaries of retirement plans must act in the best interests of the participant.  A recent article from BenefitsPro highlighted several options plan sponsors might consider to alleviate themselves of some or nearly all of the fiduciary responsibility of their plans.  For plan sponsor’s that want to minimize or share the risk of fiduciary duties, ERISA has two options: a 3(38) relationship or a 3(21) relationship.

With a 3(21) relationship, the plan sponsor shares fiduciary responsibility with an advisor.  The advisor makes recommendations about plan investments and structure but the decisions are a joint effort.  This may be a stepping stone towards a 3(38) relationship.  The plan sponsor can use such time with the advisor to evaluate the advisor’s suitability for sole fiduciary responsibility.

With a 3(38), all responsibility is on the advisor who makes all decisions regarding the plan; choosing the investments, deciding the investment policy.  The one duty for which plan sponsors still maintain a fiduciary duty is that they must be thorough when evaluating and selecting an advisor. This arrangement can be expensive and the protections from litigation may be voided if the plan sponsor resists the advisor’s decisions.

Have you considered the fiduciary role you play in your retirement plan?