Fiduciary Roles of a Retirement Plan

Fiduciary Roles of a Retirement Plan

December 5, 2023 All Articles Business Owners Retirement 0

What is a fiduciary? A person or organization that acts on behalf of another person, putting their clients’ interests ahead of their own, with a duty to preserve good faith and trust. Being a fiduciary thus requires being bound both legally and ethically to act in the other’s best interests. –

With retirement plans, there are two types of fiduciaries:

  1. Named Fiduciaries: These are specifically identified in the plan document whether it is an employer, officer of the company, or a third party.
  2. Unnamed Fiduciaries: These have a fiduciary duty simply by acting in the capacity of one or more of the fiduciaries below. This applies whether they are named or not.

Fiduciaries may be personally liable to restore any losses to the plan. —U.S. Department of Labor

Named Fiduciary: Overall responsibility for the Plan: This is someone generally at the sponsoring company (e.g., owner or officer of the company) who has the authority to enter into contracts or choose providers for the plan. They are the ones who are responsible for monitoring the investment manager as a 3(38) fiduciary also. A named fiduciary can mitigate the majority of their fiduciary risk (e.g., investment liability and responsibility); however, they still have a duty while sponsoring the plan and this responsibility cannot be delegated.

3(16) Plan Administrator: Takes on administrative roles and duties: A 3(16) administrator takes on certain fiduciary responsibilities for the sponsor such as being responsible for sending out annual fee notifications/Safe Harbor notices/QDIA notice/QDRO determinations to name a few.

3(38) Investment Manager: Highest level of responsibility and liability in regard to a 401(k) dealing exclusively with investment selection and monitoring of the plan. A 3(38) fiduciary has discretionary authority to make investment decisions for the plan. This is the typically the biggest area of concern/liability for most plan sponsors.

3(21) Investment Advisor: Does not have the same level of responsibility or liability as the 3(38); While a 3(21) signs on a co-fiduciary, it is a practical matter. The liability does not shift from the plan sponsor under this arrangement. A 3(21) advises/consults with the sponsor, but the sponsor signs makes the final decision for use of specific funds.


Securities offered through Calton & Associates, Inc. member FINRA and SIPC, a Registered Investment Adviser. Investment advisory services offered through Smart Money Group, LLC, a Registered Investment Adviser. Smart Money Group, LLC and Kennedy Financial Services, Inc. are not owned or controlled by Calton & Associates, Inc.