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Retirement Plans

Need Help Navigating Investment Responsibilities?

A well-constructed investment lineup with ongoing oversight is critically important when managing a defined contribution plan. Some plan sponsors may feel they have the knowledge and expertise to select and monitor plan investments on their own or with limited assistance from a fiduciary. Others, either uncomfortable making investment decisions or interested in outsourcing the work or liability, may be best served by hiring a 3(38) investment manager.

These days, company resources are stretched thin—businesses are expected to do more with less. Managing a defined contribution retirement plan—like a 401(k)—is not typically a top priority despite the fact that a number of functions must be effectively managed for a 401(k) plan to work well. And of course these demands are further complicated by ever-changing capital markets, regulatory complexity, and participant anxiety over how best to save for retirement.

The demands on plan sponsors are many, but they may be relieved to know that they don’t have to go it alone when it comes to investment decisions for their retirement plans. The Employee Retirement Income Security Act (ERISA) identifies several types of fiduciaries to whom they may outsource some or all of their investment-related responsibilities. Identified by the sections of ERISA—3(21) and 3(38)—that define them, these fiduciary roles provide different levels of support.

In this position paper, we identify three approaches a plan sponsor may take for selecting and managing plan investments. Along the way, we outline five important questions to consider as they contemplate engaging a 3(21) or 3(38) fiduciary to manage their plans more effectively or outsource some of their fiduciary risk. Our hope is that plan sponsors, armed with this perspective, feel empowered to make educated choices for their plans and participants.

For more, please download the full position paper below.