With increased responsibility falling on plan sponsors from The Employee Retirement Income Security Act (ERISA), it’s more important than ever that plan sponsors be educated and aware of their fiduciary duties when it comes to employee retirement plans. There are also ways that plan sponsors can find assistance and relief from the complex fiduciary burden.
Plan sponsors can consider the use of a 3(21) investment advisor or a 3(38) investment manager. The primary benefit of hiring at 3(38) over a 3(21) is the 3(38)’s ability to be the investment manager, not just the fiduciary advisor. When only utilizing a 3(21), the plan sponsor is still responsible for the selection of assets. Taking the extra step with a 3(38), a plan sponsor gains an investment manager, who has the power to acquire and dispose of plan assets. The 3(38) has discretion, while the 3(21) can only recommend funds and changes and it’s up to the plan sponsor to make the alterations.
Consider the following items that an investment manager can help a plan sponsor accomplish:
- Selection of the investment options for the plan.
- Construct model portfolios, which may be offered to plan participants.
- Build qualified default investment alternatives (QDIA) in accordance with U.S. Department of Labor (DOL) guidelines, which may be used as default investment selections for participants who fail to make an affirmative investment election.
- Monitor the investment options and models and make appropriate changes.
- Provide the plan sponsor with a semi-annual overview regarding the selection of the investment options offered to plan participants and the advisor’s management of the models. This should enable the plan sponsor to fulfill its fiduciary responsibility regarding the sponsor’s engagement of the manager.
Through the LT Trust platform, Fort Pitt is providing a 3(38) investment manager service and creating custom models on the platform that also satisfy QDIA. In this capacity, we evaluate and mitigate a plan sponsor’s risk while enhancing plan participants’ potential retirement outcome and helping achieve financial security. Our services, and those of other 3(38) advisors, are designed to save time, potentially reduce fiduciary liability exposure and address both IRS and DOL compliance requirements.
Ultimately, a 3(38) investment fiduciary will help plan sponsors responsibly meet the needs of their retirement plan participants, while also satisfying DOL regulations.