| 3(16) | 3(21) | 3(38) |
|---|
| Fiduciary Status | Yes – All Administration | No | Yes – All Investments |
| Duties | Fiduciary – Full discretion to administer the Plan | Recommend or assist selection process | Fiduciary – full discretion to select, monitor or replace investment options |
| Short Version | A Doer | A Helper | A Doer |
ERISA sets out specific fiduciary duties required for the Plan Administrator and Section 3(16) defines who may serve in this role. Unless the Plan Document expressly provides otherwise, the Plan Sponsor is considered the Plan Administrator. As a practical matter, most Plan Sponsors choose to serve in this role. However, a recent trend is for Plan Sponsors to hire an independent 3(16) Fiduciary to be named as the Plan Administrator. In that case, the independent 3(16) Fiduciary assumes the responsibility as the Plan Sponsor outsources it. A 3(16) Fiduciary should not be confused with a third-party administrator (“TPA”). The primary difference here is the level of discretionary control over the administration of the Plan. With a TPA, the Plan Sponsor delegates some of its administrative duties to the TPA, but retains discretionary control; whereas with an independent 3(16) Fiduciary, the Plan Sponsor delegates both its duties and discretionary control.
ERISA Section 3(21) fiduciaries include individuals with discretionary authority or control over the Plan or the Plan’s assets, as well as their appointees. The amount of discretion given to appointees varies by the terms of the Plan and/or appointment. Risk and responsibility follow discretion, and so the amount an individual has under 3(21) can vary widely (illustrated below). To address this, 3(21) fiduciaries are often referred to as Full, Specific, or Limited Scope Fiduciaries. These categories are not formally defined, which has led to some discrepancies in terminology. For this reason, Plan Sponsors must ensure they understand the scope of any fiduciary delegation agreement, and not rely solely on the terminology.
Plan Sponsors can delegate fiduciary responsibilities relating to the investment of Plan assets to an independent Investment Manager. Section 3(38) sets strict requirements on who can qualify and requires that the Investment Manager acknowledge and agree to the fiduciary delegation in writing, and be solely responsible for the selection, monitoring, and replacement of the Plan’s investment options. A 3(38) fiduciary must be a bank, an insurance company, or an RIA subject to the Investment Advisers Act of 1940. Section 3(38) Investment Managers should not be confused with Plan Advisors. Investment Managers have legally defined discretion under ERISA, which gives them the ability to make decisions regarding investment options. Conversely, Plan Advisors are hired to provide recommendations and advice regarding investment options, but the Plan Sponsor has the discretionary authority to accept or reject the advice. Plan Sponsors often choose to appoint both an Investment Manager and Plan Advisor.
