fiduciary post preceded by LRPC's Plan Sponsor Insight image.

Recently, there has been a lot of discussion about whether plan sponsors should contract with their administrative providers for section 3(16) fiduciary services. Outlined below are the different types of fiduciary services available to 401k plan sponsors.

Which Fiduciary?

ERISA Section 3(16) fiduciary services

A new offering in the marketplace, some third party plan administration firms (TPAs) are willing to be named as ERISA Section 3(16) plan fiduciaries for various plan administration duties. Typically, the different administrative services that these TPAs are willing to serve as fiduciaries for are listed. As a result, the type and quality of 3(16) offerings varies by provider.

For example, there are some TPAs that are willing to serve as 3(16) fiduciaries for distributions and loans but are unwilling to make a determination on whether a Domestic Relations Order is qualified. As a result, at this time the marketplace is a bit uneven in terms of 3(16) fiduciary services.

Plan sponsors should keep in mind that choosing a 3(16) fiduciary to be responsible for some or all of their plan administration duties does not relieve them of all fiduciary responsibility.

ERISA Section 3(21) fiduciary services

An ERISA Section 3(21) fiduciary generally provides investment advice to plan sponsors. Typically this takes the form of mutual fund recommendations in 401k plans. A 3(21) fiduciary shares fiduciary responsibility with a plan sponsor for any recommendations that are acted upon. Most 401k retirement plan sponsors who have retained an investment advisor who is a fiduciary, work with a 3(21) advisor.

ERISA Section 3(38) fiduciary services

An ERISA Section 3(38) financial adviser has discretionary authority over plan assets. He/she can buy and sell investments for a retirement plan without plan sponsor knowledge or approval. Section 3(38) financial advisors often are a best fit for non-employee directed retirement plans, like defined benefit plans.

Although there are fairly uniform product offerings for ERISA Section 3(21) and ERISA Section 3(38) fiduciary services, the marketplace for ERISA Section 3(16) fiduciary services is evolving. There are significant differences in service offerings, the quality of those offerings and questions about the ability of some TPAs to financially support their fiduciary responsibilities in the case of a fiduciary breach. Plan sponsors should carefully review ERISA Section 3(16) service offerings with their legal counsel before signing a service agreement.


About the Author

Robert C. Lawton, AIF, CRPS is the founder and President of Lawton Retirement Plan Consultants, LLC. Mr. Lawton has over 30 years of retirement plan consulting and administration experience and has provided consulting services to many Fortune 500 companies including: Aon Hewitt, Apple Inc., AT&T, First Interstate Bank, Florida Power & Light, General Dynamics, Houghton Mifflin Harcourt, IBM, John Deere, Mazda Motor Car Company, Northwestern Mutual, Northern Trust Company, Trek Bikes, Tribune Company, Underwriters Labs and many others. Mr. Lawton may be contacted at (414) 828-4015 or

About Lawton Retirement Plan Consultants, LLC

Lawton Retirement Plan Consultants, LLC is a Milwaukee, Wisconsin-based independent, objective Registered Investment Advisory (RIA) firm providing investment advisory, fiduciary compliance, employee education, vendor management and plan design services to 401(k) plan sponsors. The firm currently has contracts in place to provide consulting services on more than $400 million in plan assets. For more information, please contact Robert C. Lawton at (414) 828-4015 or or visit the firm’s website at: Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser.

Important Disclosures

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance, tax, legal or investment advice. Each plan has unique requirements and you should consult your attorney or tax adviser for guidance on your specific situation. In no way does Lawton Retirement Plan Consultants, LLC assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations. Investors should carefully consider investment objectives, risks, charges and expenses. The statements in this publication are the opinions and beliefs of the commentator expressed when the commentary was made and are not intended to represent that person’s opinions and beliefs at any other time. The commentary does not necessarily reflect the opinion of Lawton Retirement Plan Consultants, LLC and should not be construed as recommendations or investment advice. Lawton Retirement Plan Consultants, LLC offers no tax, legal or accounting advice and any advice contained herein is not specific to any individual, entity or retirement plan, but rather general in nature and, therefore, should not be relied upon for specific investment situations. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser and accepts clients outside of Wisconsin based upon applicable state registration regulations and the “de minimus” exception.