Help Center1. What is the difference between an ERISA 3(21) and 3(38) fiduciary?
An ERISA §3(21) fiduciary provides investment recommendations and shares fiduciary responsibility with the plan sponsor. The employer retains final decision-making authority.
An ERISA §3(38) fiduciary, by contrast, has full discretionary authority to select, monitor, and replace plan investments. This shifts a significant portion of fiduciary responsibility and liability from the employer to the 3(38) investment manager.
2. Why would a healthcare employer need fiduciary support?
Healthcare organizations face complex compliance requirements under ERISA, along with unique workforce and budgetary challenges. Engaging a fiduciary partner helps reduce liability, ensures prudent investment oversight, and allows employers to focus on patient care while maintaining compliance.
3. Does hiring a 3(21) or 3(38) fiduciary eliminate all employer responsibility?
No. Even when appointing a 3(38) investment manager, the plan sponsor retains fiduciary responsibility for prudently selecting and monitoring the fiduciary. Employers must also ensure the plan is administered in accordance with ERISA and the plan document.
4. How does an Investment Policy Statement (IPS) fit into this process?
An IPS outlines the standards and procedures for selecting and monitoring plan investments. Under both 3(21) and 3(38) arrangements, the IPS serves as a key governance document that demonstrates a prudent process and supports compliance with ERISA’s fiduciary standards.
5. What risks do 3(21) and 3(38) services help mitigate?
These services help mitigate risks such as:
- Failure to follow a prudent investment process
- Inadequate documentation of fiduciary decisions
- Potential Department of Labor (DOL) investigations or participant lawsuits
- Investment lineup mismanagement or underperformance relative to benchmarks
6. How often are investments reviewed under these services?
We conduct ongoing monitoring of all plan investments, with formal reviews provided at regular intervals (typically quarterly). Under a 3(38) arrangement, we make discretionary changes as needed to maintain compliance with the IPS and fiduciary standards.
7. What is the first step for a healthcare employer interested in these services?
The first step is a fiduciary risk review, where we assess your current retirement plan governance, investment lineup, and documentation practices. From there, we recommend whether a 3(21) or 3(38) arrangement is best suited to your organization’s needs.
8. Quick Comprison Table:
ERISA 3(21) vs. 3(38) Fiduciary Services
| Feature | ERISA §3(21) Fiduciary | ERISA §3(38) Fiduciary |
|---|---|---|
| Role | Co-fiduciary advisor | Discretionary investment manager |
| Decision-Making | Employer retains final authority over investment decisions | Fiduciary has full authority to select, monitor, and replace investments |
| Fiduciary Liability | Shared between employer and fiduciary | Largely shifted to fiduciary (employer must still prudently select and monitor fiduciary) |
| Investment Policy Statement (IPS) | Provides recommendations to align with IPS | Manages investments in accordance with IPS |
| Monitoring & Reporting | Provides performance reviews and recommendations | Conducts ongoing monitoring and makes changes as needed |
| Employer Responsibility | Must review and approve all recommendations | Must oversee the fiduciary’s performance and retain plan-level oversight |
| Best Fit For | Employers seeking guidance but wanting to retain control | Employers looking to delegate day-to-day investment responsibility and reduce liability |