3(21) Fiduciary
3(21) Fiduciary
3(21) Fiduciary – 401(k) Retirement Plan Advisor:
A 3(21)-retirement plan investment fiduciary is a paid professional and co-fiduciary on the employer sponsored retirement plan that provides investment recommendations to the plan sponsor/trustee.
When a plan sponsor hires a 3(21) co-fiduciary, The plan sponsor or plan trustee still retains the final decision-making authority over the retirement plan investments and may accept or reject the recommendations.
Both the plan sponsor and 3(21) co-fiduciaries and share equally in the fiduciary responsibility for the employer sponsored retirement plan.
The Employee Retirement Income Security Act of 1974 ("ERISA”), the law that regulates employee sponsored plan administrators and trustees, is often overlooked by business owners and retirement plan sponsors and/or trustees simply because they are not well educated on the ERISA rules and regulations.
The Employee Retirement Income Security Act of 1974 ("ERISA”) was put into place to ensure that retirement plan administrators and trustees to act solely in the interest of plan participants regarding plan investments and costs.
§ 2510.3-21 Definition of “Fiduciary.”
(1) A person shall be deemed to be rendering “investment advice” to an employee benefit plan, within the meaning of section 3(21)(A)(ii) of the Employee Retirement Income Security Act of 1974 (the Act) and this paragraph, only if:
(i) Such person renders advice to the plan as to the value of securities or other property, or makes recommendation as to the advisability of investing in, purchasing, or selling securities or other property; and
(ii) Such person either directly or indirectly (e.g., through or together with any affiliate) -
(A) Has discretionary authority or control, whether or not pursuant to agreement, arrangement or understanding, with respect to purchasing or selling securities or other property for the plan; or
(B) Renders any advice described in paragraph (c)(1)(i) of this section on a regular basis to the plan pursuant to a mutual agreement, arrangement or understanding, written or otherwise, between such person and the plan or a fiduciary with respect to the plan, that such services will serve as a primary basis for investment decisions with respect to plan assets, and that such person will render individualized investment advice to the plan based on the particular needs of the plan regarding such matters as, among other things, investment policies or strategy, overall portfolio composition, or diversification of plan investments.
(2) A person who is a fiduciary with respect to a plan by reason of rendering investment advice (as defined in paragraph (c)(1) of this section) for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or having any authority or responsibility to do so, shall not be deemed to be a fiduciary regarding any assets of the plan with respect to which such person does not have any discretionary authority, discretionary control or discretionary responsibility, does not exercise any authority or control, does not render investment advice (as defined in paragraph (c)(1) of this section) for a fee or other compensation, and does not have any authority or responsibility to render such investment advice, provided that nothing in this paragraph shall be deemed to:
(i) Exempt such person from the provisions of section 405(a) of the Act concerning liability for fiduciary breaches by other fiduciaries with respect to any assets of the plan; or
(ii) Exclude such person from the definition of the term “party in interest” (as set forth in section 3(14)(B) of the Act) with respect to any assets of the plan.