What Is an ERISA 3(21) Fiduciary?
When it comes to managing a 401(k) or other employer-sponsored retirement plan, fiduciary responsibilities can feel overwhelming. Employers are tasked with ensuring compliance, maintaining prudent investments, and acting solely in the best interest of plan participants. To help with these duties, many plan sponsors turn to an ERISA 3(21) fiduciary for support.
- What is a 3(21) fiduciary?
- What is their role in a retirement plan?
- How can they help employers meet their fiduciary obligations?
Understanding the 3(21) Fiduciary Role
Under the Employee Retirement Income Security Act of 1974 (ERISA), a fiduciary is anyone who exercises discretionary authority or control over the management of a retirement plan or its assets, or provides investment advice for a fee. A 3(21) fiduciary is an investment advisor who acts as a co-fiduciary to the plan sponsor.
Unlike some other fiduciary roles, a 3(21) fiduciary provides investment advice rather than making final investment decisions.Â
The plan sponsor (employer) retains the ultimate authority and responsibility for decisions regarding the plan’s investment lineup.
Responsibilities of a 3(21) Fiduciary
A 3(21) fiduciary helps plan sponsors manage their responsibilities by providing professional advice and guidance. While the plan sponsor remains the decision-maker, the 3(21) fiduciary’s insights can significantly reduce the risk of mismanagement.
Key Duties of a 3(21) Fiduciary Include:
- Recommending Investment Lineups:
- Identifying a diverse range of funds to include in the plan.
- Ensuring investments align with the plan’s objectives and participant needs.
- Monitoring Investment Performance:
- Regularly evaluating the performance of investment options.
- Recommending replacements for underperforming funds.
- Conducting Due Diligence:
- Ensuring investments meet ERISA’s standards of prudence.
- Documenting the selection and monitoring process to demonstrate compliance.
- Assisting with Participant Education:
- Providing resources to help employees understand their investment options.
- Supporting efforts to boost overall financial literacy.
Benefits of Partnering with a 3(21) Fiduciary
For many plan sponsors, the expertise of a 3(21) fiduciary is invaluable. Here’s why:
1. Enhanced Investment Oversight
A 3(21) fiduciary brings professional expertise to the table, helping to ensure the plan’s investments meet industry standards and align with participant goals.
2. Shared Fiduciary Responsibility
By appointing a 3(21) fiduciary, the plan sponsor shares fiduciary responsibilities. This reduces risk while still allowing the sponsor to retain control over the plan’s investment decisions.
3. Improved Documentation and Compliance
A 3(21) fiduciary helps ensure that plan management follows a documented, prudent process—essential for demonstrating compliance with ERISA regulations.
4. Support for Participant Outcomes
With better investment options and oversight, employees are more likely to achieve positive retirement outcomes, supporting their long-term financial security.
Who Should Consider a 3(21) Fiduciary?
A 3(21) fiduciary is a great fit for plan sponsors who:
- Want professional investment advice but prefer to maintain control over final decisions.
- Are comfortable sharing fiduciary responsibility while remaining actively involved.
- Seek support to enhance compliance and reduce administrative burdens.
If you enjoy staying hands-on with your plan but need expert guidance to manage the complexities of ERISA regulations, a 3(21) fiduciary can provide the balance of support and control you’re looking for.
Working with the Right 3(21) Fiduciary
Selecting the right 3(21) fiduciary is crucial. Look for an advisor with deep industry expertise, a strong track record, and a commitment to your plan’s success. Your fiduciary partner should not only help you navigate compliance but also align your plan’s investment strategy with the needs of your workforce.
Managing a retirement plan comes with significant responsibilities, but you don’t have to navigate them alone.
A 3(21) fiduciary can be an essential partner, offering the guidance and expertise you need while allowing you to retain control over your plan.
If you’re considering bringing on a 3(21) fiduciary or want to learn more about how they can support your retirement plan, contact us. We’ll help you determine the best approach to build a plan that benefits your employees and keeps you in compliance with ERISA.


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