An InvestmentNews article published this week was titled, “New flavor of outsourced fiduciary for retirement plans hits the market.” In it, the author introduces the “newest offering of fiduciary duty under Section 3(16)” of ERISA – the 3(16) plan administrator. But wait. Hasn’t the independent 3(16) plan administrator role been around for decades? Indeed, it has.

Why Now?

Roland|Criss has been serving exclusively in this role for retirement plan sponsors and their advisors for over 10 years. So what’s the fuss about this new “flavor” of fiduciary service?

As the author states, “This latest service offering is popping up in an era when plan sponsors have a heightened awareness of their fiduciary responsibilities and are looking to offload some of them so that they can get back to the day-to-day work of running their business.”

Retirement plan sponsor executives are over-worked, over-burdened, and – as of late – over-saturated regarding the risks inherent in their fiduciary role. With court cases alleging breaches of fiduciary duty and Department of Labor enforcements increasing each year, the liability of retirement plan management has claimed an unprecedented seat in the spotlight.

So, it’s no wonder that other vendors would want to ride this newfangled ERISA Section 3(16) plan administrator wave. Outsourcing the 3(16) role can be an ideal solution for plan sponsors who want to reduce their fiduciary load and minimize legal risk – and the need has never been so strong.

Avoid the Lite

But a warning from the InvestmentNews article rings true about selecting the proper 3(16) provider. “Read the fine print…If they’re a 3(16) for less than seven or eight things, then they’re 3(16) ‘lite’…3(16) for everything else would include a robust list of 20 to 30 duties.” Those duties for a full-service 3(16) would include decision making on behalf of the plan sponsor, and assumption of the legal responsibility for those decisions, not just administrative tasks.

A Recipe for Conflicts of Interest

The article mentions TPAs or advisers as potential candidates for the 3(16) role. But if the 3(16) role is considered the “latest flavor” of fiduciary services in the vendor community, then plan sponsors run the risk of handing this critical responsibility over to a vendor who is merely adding the newest taste to their flavor profile, while cooking up a conflict of interest stew for their retirement plan in the process.

An accredited, professional 3(16) plan administrator should be wholly independent from any other service roles to the plan, to ensure objectivity and neutrality in their role as steward of the plan participants’ assets – and in acting on behalf of the plan sponsor.

The Authentic Solution

Those that have served in the 3(16) space for years know this is far from a fiduciary “flavor of the week.” We like to think that the 3(16) hype is simply the retirement plan market’s matured (and well-timed) taste for a comprehensive and trusted fiduciary solution.

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