3(21) fiduciary

A 3(21) plan fiduciary is a retirement plan advisor who shares certain fiduciary responsibility with the plan sponsor regarding the plan’s investments. As a co-fiduciary, they work to ensure the retirement plan’s investment lineup is appropriate for its participants, helping mitigate liability that would otherwise fall solely on the plan sponsor. They must put participants' needs above their own interests or those of the plan sponsor.

What are the responsibilities of a 3(21) plan fiduciary

A key responsibility of a 3(21) plan fiduciary is to assist in the development of an Investment Policy Statement (IPS). The IPS serves as a roadmap for the plan's investment strategy, outlining the criteria for selecting, monitoring, and replacing investments. By working closely with the plan sponsor to create a comprehensive IPS, the 3(21) fiduciary helps ensure that the plan maintains a diversified portfolio that balances risk and potential returns.

In addition to developing the IPS, a 3(21) plan fiduciary is also responsible for continuously monitoring the plan's investments and providing advice on those investments when necessary. This involves regularly reviewing the performance of each investment option and comparing it to relevant benchmarks and industry standards. If an investment is consistently underperforming or no longer aligns with the plan's objectives, the 3(21) fiduciary will recommend a replacement to the plan sponsor. It is up to the plan sponsor to determine if the 3(21) fiduciary’s advice should be implemented or not.

By diligently fulfilling these responsibilities, a 3(21) plan fiduciary helps protect the financial well-being of plan participants and supports the plan sponsor in making informed, prudent decisions regarding the management of the 401(k) plan.

What to look for in a 3(21) plan fiduciary

When searching for a 3(21) plan fiduciary to assist with your organization's retirement plan, it's essential to find a professional who prioritizes transparency, follows a well-structured investment process, and maintains open communication with the plan sponsor. A trustworthy 3(21) fiduciary should be forthcoming about their fee structure and compensation, ensuring that you have a clear understanding of the costs associated with their services. This transparency helps build trust and allows you to make informed decisions about the management of your retirement plan.

Moreover, a reliable 3(21) plan fiduciary should have a well-defined investment philosophy and process. They should be able to articulate their approach to selecting and monitoring plan investments, as well as how they integrate the plan's Investment Policy Statement (IPS) into their decision-making process. A clear and consistent investment process demonstrates that the fiduciary has a sound strategy for managing the plan's assets and making decisions that are in the best interest of plan participants.

How to hire a 3(21) plan fiduciary

When seeking to hire a 3(21) plan fiduciary for your organization's 401(k) plan, it's essential to find a qualified and experienced professional or plan service provider who understands the complexities of retirement plan management. To ensure you make the best decision for your plan and its participants, consider the following steps when hiring a 3(21) plan fiduciary:

1. Look for a fiduciary with extensive experience in the retirement industry. An ideal candidate should have a proven track record of working with 401(k) plans and a deep understanding of the ever-changing regulatory landscape. Seek out professionals who have successfully managed plans similar in size and scope to your own.

2. Check their qualifications, such as certifications and licenses. A 3(21) plan fiduciary should hold relevant designations, such as the Accredited Investment Fiduciary (AIF), Certified Plan Fiduciary Advisor (CPFA), or Qualified Plan Financial Consultant (QPFC). These certifications demonstrate their expertise and commitment to adhering to fiduciary standards.

3. Ensure they have a clear understanding of their fiduciary responsibilities. A 3(21) plan fiduciary must be well-versed in their roles and obligations under ERISA (Employee Retirement Income Security Act). They should be able to articulate their duties clearly and explain how they will work with you to manage your plan's investments and operations effectively.

If you are interested in a plan provider that offers 3(21) advisory fiduciary services, Human Interest provides 3(21) investment advisory services to help with your investment decisions.¹ Human Interest also provides full 401(k) plan compliance with testing, IRS Form 5500 filing, IRS-approved plan documents, audit package, participant disclosures, and recordkeeping services.

1. Investment advisory services are offered through Human Interest Advisors LLC, a Registered Investment Adviser and subsidiary of Human Interest Inc. An investment advisory fee is paid to Human Interest Advisors (HIA) of 0.01% of plan assets and a separate fee for recordkeeping services and custody-related expenses is paid to Human Interest Inc. (HII) of 0.05% of plan assets. Both fees are deducted on a monthly basis from the employee's account according to the HII and HIA Terms of Service. All prices are exclusive of applicable taxes. If the plan sponsor elects to hire an external investment advisor, the plan sponsor will pay such advisor as agreed between the plan sponsor and advisor. For more information, please see our pricing page. Similar services may be available at a lower cost from other vendors.