A retirement plan fiduciary is defined by title or role. The Employee Retirement Income Security Act of 1974 (ERISA) states that any individual who must act with care and prudence for the benefit of others with regard to the services provided to a plan and its participants is considered a named fiduciary.

Plan sponsors have the ability to outsource some of their fiduciary responsibilities to help mitigate risk.

3(21) NON-DISCRETIONARY INVESTMENT FIDUCIARY

ERISA defines a 3(21) fiduciary as a service provider who:

• Doesn’t exercise discretionary authority or control over the management of plan assets
• Provides investment advice for a fee or other compensation, direct or indirect
• Advises a plan sponsor on an investment process and investment policy statement (IPS)

The plan sponsor has the ultimate decision-making power.

3(38) INVESTMENT FIDUCIARY

ERISA defines a 3(38) fiduciary as an investment manager who:

• Exercises full discretionary powers over the selection, monitoring, and replacement of investments
• Ensures the objectives of the plan’s investment portfolio are met
• Assumes responsibility for the management of plan assets

3(16) ADMINISTRATIVE FIDUCIARY

A 3(16) fiduciary is named as the plan administrator in the plan document. The administrative fiduciary takes on the following responsibilities:

• Administers and approves plan distributions
• Manages the day-to-day operations of the plan, including:
  
  • Engages and monitors service provider
  • Delivers important participant disclosures and communications
  • Signs and files Form 5500 annual report
  • Maintains plan documents and records

WHO IS NOT A PLAN FIDUCIARY?

The following groups are typically not named fiduciaries:

• Recordkeepers – perform ministerial functions for retirement plans
• Custodians – maintain custody of plan assets
• Non-fiduciary financial advisors – provide education and guidance, not investment advice
• Lawyers, accountants, auditors – provide consulting services and perform financial audits

Plan sponsors are generally at the top of the fiduciary infrastructure and responsible for making sure the fiduciary duties are being fulfilled. In selecting a third party to perform plan administration and investment fiduciary activities, the standards should be evaluated using a prudent and repeatable process.