Fiduciaries becoming lazy? One of the many fiduciary duties that a Plan sponsor must address is the oversight of the investments that are offered to participants within a 401(k) plan or a 403(b) plan. Using the simple phrase “oversight of investments” fails to capture the magnitude of what needs to occur when fiduciaries accept the responsibility of addressing tax qualified retirement plan investments.
All-in duties of the retirement committee as it relates to the investment function is much more complicated than just the selection of investments. The duty of care requires that a fiduciary act prudently when selecting investments; however there is also a duty to monitor the investments on a regular basis and evaluate the investments periodically. The monitoring can occur as frequently as monthly and the evaluation can occur anywhere between monthly and annually.
Duty of Prudence
Whatever frequency the Investment Committee chooses for monitoring and evaluating, it requires a combination of skill, experience and significant commitment of time to do it properly. At the end of each well-defined-measurement-period, the astute committee members well frequently ask themselves and other committee members, “Do you feel that we made the correct decision?” The conundrum that incessantly faces retirement committee members remains, “Is there a Right or Wrong answer” to that question? The answer is, “rarely.”
Where’s the Relief
Fortunately, the authors of ERISA, pre-1974, foresaw the need to make it simple for retirement plan fiduciaries to seek assistance when it comes to the task of investment oversight. Enter the 3(38) Fiduciary.
A 3(38) investment managers are a distinct breed of fiduciaries legally required to act in their clients’ best interests when it comes to choosing funds and managing assets. They select, monitor, and benchmark retirement plan investments on a discretionary basis. And they’re experts at doing so.
Jennifer Brookland a freelance journalist recently writes, “3(38) investment managers are a distinct breed of fiduciaries legally required to act in their clients’ best interests when it comes to choosing funds and managing assets. They select, monitor, and benchmark retirement plan investments on a discretionary basis.”
The 3(38) Investment Manager provides a valuable service to plan sponsors and plan participants. Hiring a professional to monitor and evaluate the investments used in a qualified retirement plan may be one of the most effective uses of outsourcing permitted by ERISA. Knowing one’s own limitations is beneficial for any business person. In the case of overseeing the retirement plan investments the 3(38) Investment Manager service is worthy of consideration for any fiduciary who is feeling overwhelmed with the investment functions of the retirement plan.
