Let me start out by asking a few questions:

  • How many plan sponsors know that they are the investment fiduciaries of their ERISA plans?
  • How many plan sponsors know that they have potential liability at both the corporate and personal level as the investment fiduciary?
  • How many plan sponsors have been sold ERISA 3(21) fiduciary services based on the mistaken premise that their fiduciary responsibilities will shift to a third party?

The answers are very few; very few; and most.

The value proposition for ERISA 3(21) and ERISA 3(38) services are very clear.

In layman's terms, ERISA 3(21) services are a "co-fiduciary" solution, which involves a third-party investment fiduciary recommending a menu of investment choices that have passed that fiduciary's benchmarks. As an example a plan menu might have five choices in the Large Cap Growth asset class, five choices in Mid Cap, and so on. As a "co-fiduciary" solution, someone other than the 3(21) fiduciary still has to review the recommended menu and choose the actual lineup of funds for that plan. Whoever that person is (plan sponsor, management employee, investment committee or some combination) is a fiduciary.

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