Human Interest - The 401(k) provider for small and medium-sized businesses

What is a fiduciary, and what’s a 3(16) fiduciary?

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82% of plan sponsors say fiduciary matters are important yet more than one-third of plan sponsors don’t know they’re a fiduciary. What does it mean to be a 401(k) plan fiduciary?

 

Defining a plan fiduciary 

ERISA, the Employee Retirement Income Security Act of 1974, outlines several duties that a fiduciary performs for a 401(k) plan. These responsibilities include ensuring that: 

 

Key takeaway: If an employer fails to act in a way that upholds fiduciary duty, for example, by failing to make decisions in the best interest of their employees, they may be held personally liable. 

 

Common types of fiduciaries 

The common types of fiduciaries under ERISA are: 3(16), 3(21), and 3(38), named for the section of the ERISA code they come from. 

A 3(16) fiduciary is a service provider hired by an employer to function as a “Plan Administrator,” by fulfilling a comprehensive set of duties that many plan sponsors find demanding, including keeping the plan in compliance with ERISA guidelines (compliance failures can be costly). 

Hiring a 3(16) plan fiduciary removes significant liability from the employer actively managing the day-to-day duties of a 401(k) plan. 

A 3(21) or 3(38) fiduciary plays a role in overseeing the plan assets and/or investments and they are required to act under ERISA guidelines.  

 

Advantages of appointing a plan fiduciary

The different types of fiduciaries vary in the roles and responsibilities they’ll perform on behalf of an employer, including those that place a lot of demand on employers:

From filing paperwork with government agencies to ongoing communications between employees and service providers, 401(k) plans need ongoing support to stay compliant with the law. For that reason, many employers, especially small and medium-sized businesses, find it helpful to hire a 3(16) fiduciary to serve as the plan administrator and to handle much of the administrative work.

Human Interest proudly offers 3(16), 3(21), and 3(38) fiduciary services. Talk to us to find out the best fit for you and your company. 

The Human Interest Team The Human Interest Team

We believe that everyone deserves access to a secure financial future, which is why we make it easy to provide a 401(k) to your employees. Human Interest offers a low-cost 401(k) with automated administration, built-in investment advising, and integration with leading payroll providers.

Small and medium businesses can be prepared, too.

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Human Interest - The 401(k) provider for small and medium-sized businesses

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Get free 401(k) resources now. Learn more about 401(k)s for you and your company.