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What Is a Fiduciary, and What’s a 3(16) Fiduciary?

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: 

  • Fees are reasonable and not excessive,
  • Terms outlined in plan documents are followed,
  • Investments are diversified, and
  • Decisions about the plan and investments are made in the best interests of participants (and their beneficiaries).


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 allows the sponsoring employer to delegate some fiduciary responsibilities, and limits their fiduciary responsibility, as well as the overall administrative burden of operating a 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:

  • Reducing an employer’s liability. Fiduciaries take on a suite of legal responsibilities and are responsible for making decisions about, or managing, a 401(k) plan and its assets.
  • Reducing the day-to-day administrative work involved in managing a 401(k) plan. For example, rather than the employer having to work through issues like loan and distribution approval, a 3(16) fiduciary will do this for you. Some 3(16) fiduciaries will even handle signing and filing the annual Form 5500 required of many 401(k) plans.

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. 




This blog post, prepared by Human Interest, does not provide tax, legal or accounting advice. The content has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. Human Interest’s investment advisory services are provided by Human Interest Advisors, LLC, an SEC-Registered Investment Adviser. Investing involves risk and may result in loss. 

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.


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