Defining Fiduciaries

Employers sometimes have a muddled view of what fiduciary responsibility means in their role as a retirement plan sponsor – they may underestimate their fiduciary duties, overlook critical fiduciary functions or mistakenly believe that someone else holds primary fiduciary responsibility. Familiarity with key fiduciary responsibilities and strategies can help you be more confident about fiduciary issues.

Who is a Fiduciary?

When it comes to retirement plans, a fiduciary is generally anyone with discretionary authority or control over a plan or the investments offered in the plan. A person’s function with respect to the plan – and in some cases, his title within the company – determines who is a fiduciary. Certain positions are always considered fiduciaries, such as plan trustees. Plan sponsors are usually plan fiduciaries. In addition, the people who own or manage the company and make the decision to have a retirement plan are generally considered plan fiduciaries. A fiduciary assumes personal liability with respect to the employees who participant in the plan, and their heirs.

Named Fiduciary

Every plan must have at least one person or entity designated as the fiduciary of the plan. This person is the “named fiduciary” and is identified in the plan documents. The named fiduciary may:

3(38) Investment Manager

The Investment Manager, also known as the 3(38) fiduciary, assumes full discretionary responsibility for selecting and monitoring plan investments. The named fiduciary is responsible for the selection of the investment manager, but once the investment manager is selected, the fiduciary responsibility for the actual investment decisions is then transferred to the Investment Manager.

3(21) Investment Advisor

A 3(21) Investment Advisor shares the fiduciary responsibility with you, the plan sponsor. You still have full legal responsibility of the plan and must monitor the performance of the 3(21) fiduciary.

3(16) Plan Administrator

Section 3(16 of ERISA discusses the responsibilities of the plan administrator. They have statutory responsibility for ensuring all filings with the federal government, such as form 5500 forms, are made in a timely manner and making important disclosures to plan participants. The plan administrator is not the same as a “pension administrator” or “Third Party Administrator”.


The trustee is a person or group of persons recognized as having exclusive authority and discretion over the management and control of plan assets. An independent fiduciary has exclusive authority and control when they are appointed to the plan; the trustee reports to the independent fiduciary. There are two types of trustees, discretionary and directed. Directed trustees take orders from other fiduciaries whereas discretionary trustees are empowered to make decisions independently. The trustee is not to be confused with the “Custodian” of the plan.

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