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Meeting 401(k) Fiduciary Responsibilities is not Hard

ERISA is complicated and fraught with significant liability which many employers sponsoring a defined contribution (DC) plan like a 401(k) or 403(b) do not understand. Many think that if they hire a co-fiduciary, their responsibilities are abrogated, which is not true. A TPA in the south outlines the fiduciary hierarchy and explains in plain English what roles third parties can play to help plan sponsors fulfill their fiduciary duties.

At the top of the “ERISA org chart” is the named fiduciary which is usually the employer unless they hire a third party to take over known as a 3(16) administrator – the plan can also hire a 403(a) Trustee to fill that role. Regardless, the employer must be sure that the 3(16) administrator or Trustee is qualified to perform these duties and they must be monitored regularly.


Financial advisors can plan an active or relatively passive role. The most engaged is an advisor who makes decisions about which investments will be available in the plan known as a 3(38) advisor; next is a 3(21) advisor who makes recommendations; finally, advisors can determine if investments are suitable and not act as a fiduciary.

In addition, there are record keepers who track contribution and investments by participants and TPAs (third party administrators) who focus on compliance. Some record keepers known as “bundled providers” also do compliance work.

So what does this all mean? Plans can delegate authority over running their DC plan to a 3(16) or a 403(a) fiduciary who also hire and fire third parties which need to be vetted and monitored. Similarly, they can outsource selection of investments to a 3(38) advisor. More and more plans are moving to a 3(16) and 3(38) solution as well as MEPs (multiple employer plans where different companies join one plan) to offload most of their fiduciary responsibilities.

Regardless, plans should be strategic about which types of arrangements meet the needs of the participants and the company and then find the right professionals to help. Without some fiduciary training, it can seem overwhelming. But with a little time and effort, discharging ERISA fiduciary responsibility can be easy.

Fred Barstein

Fred Barstein

Founder & Editor-in-Chief at 401kTV | TRAU | TPSU
Fred Barstein is the Founder & Editor-in-Chief of 401kTV. Fred is also the Founder and CEO of The Retirement Advisor University (TRAU), a collaboration with UCLA Anderson School of Management Executive Education and The Plan Sponsor University (TPSU).Mr. Barstein was also Founder and Editor-in-Chief of NAPA Net.
Fred Barstein

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