Why a 3(21) fiduciary could make sense for retirement plan sponsors

  For sponsors of corporate retirement plans, the excitement of helping employees save for life after work is balanced with the necessity of ensuring the plan is compliant with all applicable regulations.

To get a sense of the requirements placed on plan sponsors, a good place to start is the Internal Revenue Service website, which offers a helpful list of general guidelines and links to federal rules and guidelines for corporate retirement plans.

The U.S. Department of Labor website also has helpful information on the fiduciary requirements under a retirement plan. According to the Employee Retirement Act Income Security Act of 1974 (ERISA), which applies to corporate-sponsored retirement plans, a fiduciary is someone who "exercises any discretionary authority or discretionary control" over the management or administration of a plan. A fiduciary can also be someone who "renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so."

In short, the key decision-makers in corporate retirement plans may well face some fiduciary responsibility for their actions and decisions regarding the plans. Not surprisingly, plan sponsors might not be comfortable bearing such risk and responsibility alone. And for those plans, a 3(21) fiduciary could make a lot of sense.

A 3(21) fiduciary advises plan management on investment options and other matters, including compliance. However, a 3(21) fiduciary can only make recommendations; plan management is left to make the final decisions. That said, the fiduciary, in this case, shares in the liability in the event something goes wrong. A (3)21 fiduciary is different than a 3(38) fiduciary, who can make decisions on behalf of the plan without the approval of plan management.

For more information on fiduciary responsibility or corporate retirement plan compliance, contact a Plexus Financial Services client service representative at 847-307-6222, or contact us via the Web.

Disclaimer: Plexus Financial Services does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable; we cannot assure the accuracy or completeness of these materials.

Plexus Financial Services is located at 21805 Field Parkway, Suite 300, Deer Park, Illinois 60010. The company phone number is 847 307-6222.

Securities and advisory services offered through Plexus Financial Services LLC, member FINRA/ SIPC, a registered investment adviser.