3(38) Investment Fiduciary Services
Professional investment management and fiduciary oversight for your retirement plan, freeing your organization from daily investment responsibilities while ensuring every decision is made in your participants’ best interests.
What an ERISA 3(38) Investment Manager Is
ERISA Section 3(38) defines an "investment manager" as a fiduciary who has the power to manage, acquire or dispose of plan assets, who is a registered investment adviser, bank or qualified insurance company, and who acknowledges in writing that it is a fiduciary with respect to the plan. All three conditions matter — without the written acknowledgment, there is no 3(38).
The practical effect is ERISA 405(d)(1): when an investment manager is properly appointed, the other fiduciaries are not liable for that manager's individual investment decisions. Discretion, and the responsibility that follows it, genuinely moves. What remains with the appointing fiduciary is the duty to have selected the manager prudently and to monitor it — a real duty, but a much narrower one than picking and defending every fund.
3(21) vs. 3(38) — Who Actually Decides
| 3(21) adviser | 3(38) investment manager | |
|---|---|---|
| Authority | Recommends | Decides and implements |
| Who signs off on a fund change | The sponsor or committee | The manager |
| Who is liable for the investment decision | The fiduciary who accepted the recommendation | The manager, under ERISA 405(d)(1) |
| What the sponsor still owns | Every decision, plus selection and monitoring | Prudent selection and ongoing monitoring of the manager |
| Written fiduciary acknowledgment | Often limited | Required by statute |
How Admin316 Runs the Investment Fiduciary Role
1. Investment policy statement
A working IPS with defined asset classes, selection criteria, monitoring metrics and replacement triggers — not a template nobody applies.
2. Lineup construction
A menu built for a participant-directed plan: broad asset-class coverage without redundant overlap, share classes appropriate to the plan's size, and revenue sharing identified and accounted for.
3. QDIA selection
Choosing and documenting the default investment under the 404(c)(5) QDIA regulation, including the target-date glide path and its suitability for your workforce.
4. Ongoing monitoring
Scheduled reviews against the IPS: performance versus benchmark and peers, expenses, manager tenure and style consistency, with watch-list and replacement decisions written down.
5. Fee scrutiny
Fund expense ratios, share-class availability, revenue sharing and how plan costs are allocated among participants — the substance of excessive-fee litigation.
6. Documentation
Every decision, with rationale and date. Prudence under ERISA 404(a)(1) is judged on process, and process only exists if it is written down.
Where Plan Sponsors Get Hurt
Believing they have a 3(38) when they do not. Many advisory agreements are 3(21) or non-fiduciary. Read the fiduciary-acknowledgment language, and confirm the appointment is documented.
Expensive share classes. Holding a retail share class when an institutional class is available to the plan is one of the most common and most indefensible findings.
Unmonitored menus. Funds that have drifted, underperformed for years or duplicate each other, with no watch list and no minutes.
Undocumented QDIA. The default fund is where non-electing participants end up; if its selection is not documented, that exposure is unmanaged.
Revenue sharing nobody tracked. Payments that offset plan costs must be identified, reasonable and applied consistently with the plan's terms.
Who This Fits
- Sponsors whose committee does not want to make, defend and document every investment decision.
- Plans with no formal committee, no IPS, or no meeting minutes for the last several years.
- Sponsors who want investment discretion held by a fiduciary that does not sell recordkeeping or proprietary funds.
What Belongs in a Working Investment Policy Statement
| Element | What it specifies | Why it matters in a dispute |
|---|---|---|
| Purpose and roles | Who selects, who monitors, who implements | Establishes that discretion was deliberately allocated |
| Asset-class structure | The categories the menu must cover, and what it will not include | Shows the lineup follows a design, not sales pressure |
| Selection criteria | Track record, expenses, manager tenure, style consistency, capacity | Makes each selection reviewable against a standard |
| Monitoring metrics | Benchmarks, peer groups, measurement periods | Prevents after-the-fact benchmark shopping |
| Watch list and replacement triggers | What causes review, what causes removal, over what period | Answers "why did you keep this fund?" with a rule instead of a memory |
| Default investment | The QDIA and the basis for choosing it | Supports 404(c)(5) protection for non-electing participants |
| Fee policy | Share-class policy, revenue-sharing treatment, cost allocation | Directly addresses the theory in most excessive-fee cases |
Share Classes and Revenue Sharing, Plainly
The same fund at two prices
Many funds offer retail and institutional classes holding identical portfolios at different expense ratios. Holding the expensive class when the plan qualifies for the cheaper one is difficult to defend.
Revenue sharing is plan money
12b-1 fees and sub-transfer-agency payments embedded in fund expenses are indirect compensation. They must be identified in 408(b)(2) disclosures and treated consistently.
Levelization
Where revenue sharing exists, crediting it back to participant accounts avoids some participants subsidizing the plan's costs for others.
Zero-revenue lineups
Menus built without revenue sharing, with administration billed explicitly, are simpler to disclose and easier to defend.
Watch the wrapper
Insurance-platform separate accounts and collective trusts have their own fee layers that do not appear in a fund expense ratio.
Document the choice
Whatever structure you use, the file must show the fiduciary knew the alternatives and chose deliberately.
Participant-Directed Plans and ERISA 404(c)
404(c) is narrower than sponsors think. Relief applies only to losses resulting from a participant's own exercise of control, and only when the required information and a broad range of alternatives are actually provided. It never protects the selection and monitoring of the menu itself.
The QDIA is a fiduciary decision. Automatic-enrollment dollars land in the default. The 404(c)(5) regulation gives conditional protection only if the QDIA qualifies and notice requirements are met.
Fee disclosure is separate. The 404a-5 participant disclosure regulation has its own annual and quarterly requirements; satisfying it does not establish prudence of the lineup.
Who This Fits
- Plans with no IPS, or an IPS that has never been used to make a decision.
- Committees that meet irregularly, keep no minutes, and cannot explain why a fund is still on the menu.
- Sponsors who want the investment decision held by a fiduciary with no product, recordkeeping or proprietary-fund interest.
Where It Falls Short
- A 3(38) appointment does not fix administrative exposure — deposits, notices, testing and filings are 3(16) work.
- If the recordkeeping platform limits available share classes or funds, some cost issues can only be solved by changing platforms, which is a sponsor decision.
Frequently Asked Questions
What is the difference between a 3(21) and a 3(38) fiduciary?
A 3(21) adviser makes recommendations and the plan fiduciary makes the decision, keeping the liability for it. A 3(38) investment manager has discretion to select, monitor and replace investments, and under ERISA 405(d)(1) the other fiduciaries are not liable for the manager's individual investment decisions.
Do we still have fiduciary duties if we appoint a 3(38)?
Yes. You retain the duty to have selected the manager prudently and to monitor it on an ongoing documented basis. You no longer own each individual investment decision.
Does a 3(38) appointment require the written acknowledgment of fiduciary status?
Yes. ERISA 3(38) requires the manager to be an RIA, bank or qualified insurance company and to acknowledge in writing that it is a fiduciary to the plan. Without that acknowledgment, the appointment does not achieve the intended relief.
Will our participants' investment options change?
Possibly. We review the lineup against the investment policy statement, including share classes and revenue sharing, and any changes are made and documented as fiduciary decisions with participant notice as required.
Can Admin316 serve as 3(38) and 3(16) at the same time?
Yes, and many sponsors engage both so investment discretion and administrative responsibility sit with one independent fiduciary. The roles remain separately defined in the plan document and service agreement.
Who is liable if an investment we hold performs badly?
Poor performance alone is not a breach. ERISA judges the process: whether the fund was selected against stated criteria, monitored against a stated benchmark, and retained or replaced under a stated rule. Where a 3(38) manager holds discretion, that manager owns the decision under ERISA 405(d)(1).
Does ERISA 404(c) protect us because participants choose their own funds?
Only partially. 404(c) can relieve fiduciaries of losses that result from a participant's own investment choices, and only if its information and broad-range conditions are met. It never relieves the fiduciary duty to select and monitor the menu itself.
How often should the lineup be reviewed?
At least quarterly against the investment policy statement, with an annual deeper review of expenses, share classes and revenue sharing. Written minutes are what make the review count.
Can we keep our existing advisor if Admin316 is the 3(38)?
Yes. Many sponsors keep their advisor for participant education, enrollment support and relationship service while investment discretion sits with an independent fiduciary.
Educational information only. Fiduciary status, plan operations and correction options depend on your plan document, service agreements and specific facts. Nothing here is legal, tax, investment or actuarial advice, and reading it does not create a fiduciary or client relationship.
Discretionary Investment Management
As your 3(38) Investment Fiduciary, Admin316 holds full discretionary authority over your plan’s investment menu, selecting, monitoring, and replacing funds as needed to ensure your plan’s investments always align with ERISA standards and participant best interests.
Fund Selection & Replacement
- Investments
- Oversight
Asset Allocation Management
- Strategy
- Diversification
Portfolio Performance Review
- Monitoring
- Benchmarking
Fiduciary Risk Management & Compliance
Admin316 proactively manages and mitigates investment-related risks by following ERISA standards and implementing rigorous compliance measures, staying current on regulatory changes and adapting investment strategies to minimize penalties and keep your plan fully protected.
ERISA Compliance Monitoring
- Regulatory
- Protection
Risk-Adjusted Return Strategy
- Risk
- Performance
Regulatory Change Adaptation
- IRS
- DOL Updates
Comprehensive Investment Oversight & Reporting
Admin316 provides day-to-day oversight of your plan’s investments with full transparency and accountability at every stage, managing investment operations, generating performance reports, and ensuring your retirement plan operates with maximum efficiency and fiduciary integrity.
Day-to-Day Investment Oversight
- Operations
- Accountability
Performance & Transparency Reporting
- Reporting
- Clarity
Third-Party Administrator Support
- TPA
- Full-Service
Expert Investment Oversight, So You Don't Have To
Investment oversight carries significant risk when compliance or strategy falls short. Admin316 removes that burden entirely, managing plan assets with a focus on regulatory compliance, sound investment strategy, and long-term risk reduction.
Dedicated Expertise
Our fiduciary managers are specialists in ERISA 402a obligations, bringing focused knowledge and decades of hands-on experience to the oversight of your retirement plan.
Reduced Internal Burden
By outsourcing fiduciary responsibility to Admin316, your team is freed from the complex, time-consuming demands of plan administration, letting you focus on your core business
Full Legal Accountability
As your named 402a fiduciary, Admin316 assumes legal responsibility for plan governance, meaning we are accountable, not just advisory, for every fiduciary decision made.
Proactive Compliance
We don’t react to compliance failures, we prevent them. Exactly, our team actively monitors regulatory changes and adjusts your plan’s operations before issues ever arise.
- Worked With 500+ Plan Sponsors
- ERISA Industry Expert
- Trusted Independent Advisors
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